After last year's accumulation and precipitation, the decentralized exchange Uniswap and the loan agreement Compound have achieved breakthroughs at different levels with the development of DeFi last year, but they have not been used on a large scale in the field of derivatives. We should know that in the traditional financial field, the volume of derivatives is 40 to 60 times that of spot, while in the encrypted market, the market value of derivatives still accounts for less than half of the volume of the whole digital asset market.
In contrast, there is still a huge imagination for the development of derivatives, and this situation has seen its dawn this year. A simple example is that due to the instability of value, many institutions began to try to use derivatives to avoid risks, discover prices, arbitrage and preserve value, and gain more value capture. It can be said with certainty that the more the encrypted assets and DeFi burn, the stronger the demand for derivatives will be, and the speed of market penetration and transmission will be accelerated, thus stimulating the emergence of new species in the market to make up for the gap and demand in the existing market.
The definition of financial derivatives generally refers to a bilateral contract that has a trading swap relationship between them or transfers risks for traders. It gives the holder a certain obligation or the option to buy and sell a financial asset, and its value is determined by the price of the financial asset it trades, such as options, futures and swap contracts. In the field of DeFi, the definition of derivatives is roughly similar to the above definition.
At present, judging from the relatively fair mainstream types, there are mainly trading options futures, synthetic assets, etc. Decentralized insurance and forecasting machine tools are still a very large separate sector. Let's learn about this track through mainstream derivative types.
- Trading derivatives
The first category is bitcoin futures products. According to the data of Glassnode, an encryption market data aggregation service provider, the trading volume of bitcoin futures has been growing steadily since November last year. At present, the average daily trading volume of bitcoin futures has exceeded 180 billion US dollars. In addition, bitcoin option trading has also surged and will usher in a new record level this year. At present, some exchanges have realized regular custody with an average daily trading volume of over USD 1 billion.
The growing volume of transactions has also promoted more institutional units to try to start such products. According to public news reports, in early March, Goldman Sachs announced that it had restarted the cryptocurrency trading counter and began to provide customers with bitcoin futures and non-deliverable forward contracts (NDF) trading services.
After that, Giant Steps Capital, the largest asset management company in Latin America, also announced that it would launch a fund focusing on investing in bitcoin and other digital asset futures, and use machine learning strategy to trade bitcoin and similar asset futures. Bitcoin option futures trading is entering the incremental market, and the better news is that besides Bitcoin, various exchanges have launched derivatives trading of other cryptocurrencies. And it's constantly evolving.
Apart from centralized exchanges and financial institutions, the other is decentralized development of derivatives agreements. Including dYdX, Kine and Injective, are all futures trading projects. DYdX was born in 2017, which is a very early DeFi derivative agreement. It adopts the transaction mode of order book under the chain and settlement on the chain, and besides the perpetual contract, it also includes the functions of borrowing and leverage transaction.
At present, the perpetual contract of the project runs on Lay1 in ETHereum, and the test of Lay2 main network is also being carried out synchronously. Kine is a model similar to centralized exchange, adopting the trading mode of "on-chain trading" and "Peer to Pool" promoted by Synthetix, trading users can have unlimited liquidity and zero sliding point, and because the trading in Kine takes place under the chain, it is not very affected by the performance of public chain, which ensures the trading speed. The disadvantage is that Kine can't be called a decentralized protocol party, which has certain security risks.
Options include Opyn, Hegic, etc. Opyn protocol allows users to create call or put options, and users can buy and sell options with given products, delivery time and strike price. On the definition of trading time of options, Opyn adopts European cash settlement options, that is, the option holder does not need to take any measures on or before the maturity date, and the delivery will be automatically executed upon maturity, and the products have been priced by USDC, so the option seller needs to have 100% pledge deposit as guarantee to deal with market risks. Hegic solves the liquidity problem of option products by means of flowing pool. At present, options including BTC and ETH are included.
Users can provide funds in Hegic to form a liquidity pool. These funds will be used to automatically sell call and put options and become the counterparty of buyers. Liquidity providers bear the option risks, and at the same time enjoy the benefits of selling options.
Among the derivatives of perpetual contracts, dfuture is an innovative agreement.Instead of adopting the traditional order book trading mode, the protocol solves the problems of transaction depth, liquidity and control through innovative "constant sum formula".At the same time, we introduce several external Oracle machines and decentralized exchange to feed the price to obtain the current quotation of the trading category, and form an index price through weighted average.
Guarantee the risk-free profit of LP to the greatest extent.At present, the platform has been deployed on the heco chain and BSC chain, and has initially stabilized. Because it relies on the traffic attribute advantages of the public trading chain and undertakes most of the customer traffic driven away by the congestion of ETHereum, the overall development is very smooth.
- Composite assets
Composite asset is a simulation expression of almost all the assets with price through asset agreement mapping. However, it is not the original asset itself, nor does it represent the ownership of the asset in the real world. It is just anchoring the value of the asset, and it is an alternative expression of the existing asset in the chain parallel world.
At present, it can be synthesized into stocks, fiat money, gold, BTC and other assets.The most representative of the synthetic asset track is undoubtedly the synthetic asset issuance protocol synthetix based on ETHereum.It supports synthetic assets including French currency, cryptocurrency and bulk commodities. It mainly tracks basic assets based on debt pool, and supports users to provide collateral in the form of SNx token, so as to cast composite assets.Over the past two years, the total lock up volume has exceeded 3.2 billion US dollars.It ranks first in the list of synthetic assets, which is far behind other projects.
(source: debank)
Mirror is the other one with a fierce rise in synthetic assets. Last month, Robin Hood, a securities trading platform in the main battlefield of investors, was announced to limit the opening of GME and AMC stocks by a number of local securities companies in the United States, and the synthetic asset platform launched a vote to launch Online the synthetic asset trading corresponding to GME stock,It provides a new possibility for investors who have trading demand not to be restricted by centralized platform trading.As a rookie, mirror has developed rapidly and has become the largest synthetic US stock trading platform. More than 20 synthetic assets have been launched on the platform, covering US stocks, crypto assets, bulk commodities, etc. in general, mirror, a fast-moving step in market demand insight, is constantly emerging opportunities.
Another decentralized synthetic derivatives platform, supercash, says it has the ability to cash, which allows the free addition and trading of various digital asset derivative pairs in a single currency.Support includes BTC, ETH, erc-20s, gold, stock and other trading pairs. Oracle service has also been introduced from the original external to the present independent research and development.The greater outstanding capability of the platform is the ability to synthesize automatic market makers, which allows liquidity providers (LP) to provide only one asset, and the other asset will be automatically synthesized by smart contracts.In other words, half of the assets you provide will automatically create futures positions through contracts, which greatly reduces the user's participation threshold. In addition, the introduction of automatic liquidator smart contract to assist in clearing is a passive market maker mode similar to AMM.
Because anyone can become an automatic liquidator by providing liquidity through agreement, it is based on the customer base of a large number of liquidators,The platform further makes the clearing pool business into a separate product, providing clearing services for other defi projects.
Taking advantage of the boundless encryption market and the innovative combination of market elements, ordinary people are able to participate in asset trading. Synthetic assets, a derivative track, has great imagination. Specifically, it simulates hot investment scenarios on the chain with the help of blockchain decentralized trading platform operators and access without permission,It provides an excellent way for ordinary investors with demand to trade diversified asset classes such as US stocks and gold at a low threshold.Moreover, the richness of synthetic assets is almost unlimited. It can cover gold, crude oil, US stocks and even foreign exchange markets. There is no license for trading varieties, and any assets with public price can be traded.This is very much in line with the development of traditional finance and the existing defi market.
In addition to the futures, options and synthetic assets mentioned above, there are other derivatives such as augur forecast market, nexus mutual insurance and interest rate swap.As a matter of fact, we find that today's defi derivatives are no longer only serving the original encrypted assets on the chain, but are constantly exploring the unknown and possible fields. With more open and transparent infrastructure and more yuan and fair financial distribution mode, we can make the assets on the chain and all assets anchoring real asset transactions simple, and truly ensure the safe and secure transactions between users.
Compared with the large promotion cost of most derivatives in the traditional financial field, derivatives in the field of defi are created at almost zero cost and quickly pushed to the trading market. Because the environment of defi includes Oracle service, asset agreement, transaction layer, data layer, clearing layer, insurance layer and derivatives trading layer, it can realize the highly free financial LEGO combined innovation drive,The creators of derivatives can leverage more market opportunities with less resources, and the unilateral innovation and improvement of derivatives field also make the network effect of the entire defi ecosystem more powerful.
It directly brings very different experience to the whole ecological construction and user wake-up.In the future, the derivatives market will be in full bloom, and the coexistence of multiple strengths in the future will also be the inevitable trend of the industry development.In a word, the future of defi derivatives will exceed the development potential of traditional financial perspective and release unlimited possibilities.