Crypto Derivatives Ecosystem – Everything you need to Know

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Crypto Derivatives Ecosystem – Everything you need to Know

When Bitcoin was first launched in 2008, Satoshi Nakamoto said they have developed “A peer-to-peer Electronic Cash System with the goal of inventing what majority of people failed to create before Digital Cash.”

A decade later, all that it promises, BTC and cryptocurrency have gained a bad reputation from some market insiders just because of its volatile nature. Also, risk has always been a foundation of derivatives. Derivatives play a crucial role in almost every financial market.

The crypto-assets can create a case in which derivatives have taken a second priority to the development of tier 1 blockchain protocols, exchanges as well as token sales. The crypto-derivatives are different from other types of the financial derivative in the critical point: THEY ARE PROGRAMMABLE PROTOCOLS that opens the door to all sort of exciting possibilities.

Today, we’ll put lights on the group of protocols that are innovating on the assumption of programmable derivatives. These protocols enable the implementation of all sorts of complicated financial implements.


What are Crypto Exchanges offers?

The top crypto exchanges in the market such as BitFinex, Bitstamp as well as Binance offers only Spot Trading while Bitmex and 1Broker offers a Futures and Leveraged trading. No crypto exchange offers a comprehensive platform to trade all kinds of financial instruments.

Moreover, all the crypto exchange platform interfaces are conducive for trading; however, they fail to impress any traditional traders. Traditional traders use the trading interfaces which allows quick, accurate as well as seamless execution of multiple orders along with the tools. These tools are advanced in charting as well as data visualization and analytics capabilities. You can also get a leverage on altcoins, for example, you can long or short ripple on crypto derivatives platforms such as Delta.

Now let’s have a look at some of the best crypto-derivative protocols.

1. {Set} Protocol
The first crypto derivative featured in our list is {Set} Protocol. It’s an Ethereal-based protocol for collateralized ERC20 tokens. In general, a {Set} token is an ERC20 token with two additional functions: issue as well as redeem which serve to convert between the {Set} token and its constituent tokens.

Moreover, the {Set} Protocol team has their eyes set on enabling higher order derivatives including index funds, they recently launched TokeSets to illustrate the possibilities of the protocol.


2. dYdX
The dYdX is one of the complete derivative protocols in the market. Typically, dYdY introduces the notion of a Margin Trading Protocol which mimics the similar behavior in the financial markets. In the traditional margin trades, a trader borrows an asset and quickly trade it for another asset. Also, the asset must be repaid to the lender, along with interest, later on.

The dYdX Margin Trading Protocol uses the one principal Ethereum Smart Contract which provide the decentralized margin trading of ERC20 tokens. Moreover, Lenders in dYdX can offer loans for Margin Trades by signing in with a message that mainly contains loan information like the amount, the token number involved as well as the rate of interest. The credits can be transmitted and listed on off-blockchain platforms.


3. Dharma
Dharma is the next crypto-derivative protocol which is highly generic construction that allows debt agreements of virtually any type to be issued, crowdfunded as well as traded as tokens. Moreover, the Dharma Protocol is based on the two main concepts are as follows:

1. Agents: It represents the end-consumer of the protocol, i.e., entities looking to borrow or lend the crypto-assets. Agents are of two types which are Debtors and Creditors.

2. Keepers: It represents utility players who provide value-added services to the network and compete in their respective marketplaces for compensatory fees. Now, again Keepers are of two types which are as follows Underwriters and Relayers.


The Conclusion

So, here we have put lights on every aspect of crypto exchange ecosystem. We have also mentioned the first examples of derivative protocols which are becoming relevant in the crypto space.

Furthermore, as the trends like security token or crypto ETFs become more popular. We can see crypto-derivatives become the more relevant component of the next generation of crypto-assets.


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