Decentralized Derivatives

Module 2.5: Decentralized Derivatives

Aqua Protocol (Stablecoin on TON)


Welcome to Module 2.5, where we delve into the world of decentralized derivatives in DeFi, focusing on their roles in hedging, speculation, and access to assets. We’ll explore various types of derivatives such as futures, options, synthetic assets, and more. A hallmark of decentralized derivatives is their operation on the blockchain, ensuring transparency and security without intermediaries. This module also highlights key DeFi platforms for trading derivatives, including dYdX, GMX, Gains Network, and others, showcasing their innovative approaches and contributions to market development. We conclude with an overview of trends and prospects, emphasizing the impact of decentralized derivatives on financial markets and their potential to democratize access to global finance.

Why Derivatives Matter

  • Derivatives are financial instruments whose value is derived from underlying assets. They offer unique opportunities for hedging, speculation, and accessing assets without direct ownership.
  • Uses include futures contracts to protect against price fluctuations, options on stocks to guard against losses, and synthetic assets for exposure to assets like gold without physical ownership. These instruments play a central role in risk management and optimizing investment strategies.
  • Decentralized derivatives distinguish themselves from traditional counterparts by operating on the blockchain, offering transparency, security, and access without intermediaries like banks or exchanges, providing a new level of financial freedom and control.

Examples of Decentralized Derivatives

  • Decentralized Futures: Lock in prices for assets like cryptocurrencies for a future date, offering protection against volatility.
  • Decentralized Options: Grant the right, but not the obligation, to buy or sell an asset at a fixed price, allowing for risk hedging.
  • Synthetic Assets: Provide exposure to traditional assets (e.g., gold, oil) through blockchain, simplifying access to a wide range of investments.
  • Liquid Staking Derivatives (LSD): Offer access to liquidity through staking, presenting unique earning opportunities.

Importance and Advantages

Decentralized derivatives offer significant advantages over traditional financial instruments, including enhanced security of funds, protection from potential exchange failures, and global access without censorship and restrictions.

Leading DeFi Platforms for Trading Derivatives

  • The decentralized financial derivatives market is gaining momentum, offering traders innovative platforms for perpetual trading. Key players include:
  • dYdX and GMX: At the forefront of decentralized perpetual futures platforms, offering advanced options for margin trading with leverage.
  • Gains Network and GTrade: Provide access to various markets, including cryptocurrencies, stocks, and forex, all with cryptocurrency deposits.
  • In the TON network, Storm Trade: Offers high-leverage derivatives trading with low fees and innovative financial instruments.
  • AEVO on Ethereum: Opens new opportunities for traders through access to options, perpetual futures, and unique pre-launch futures trading.
  • Hegic: Uses innovative approaches for options trading in a decentralized environment, simplifying the trading process.
  • Synthetix: Works on creating infrastructure for derivatives, helping other projects quickly enter the market.

Trends and Prospects

  • The growth of decentralized derivatives in 2024 showcases the rising popularity of perpetual futures and the influence of DeFi on the traditional derivatives market. Platforms like GMX and new technologies from Uniswap Labs are making significant contributions to the evolution of the market, offering more efficient and accessible solutions.
  • Decentralized derivatives are not just tools for risk management and speculation but also a means for everyone to access global financial markets with a low entry threshold, democratizing finance in the blockchain and DeFi era.

Remember: When dealing with derivatives, it’s crucial to consider market and liquidation risks, as well as potential errors in smart contracts. Careful study of the instruments and portfolio diversification can help minimize potential losses.

This course was prepared by Julia Palamarchuk (co-founder of Aqua Protocol — the first CDP stablecoin on the TON blockchain, over-collateralized by liquid staking tokens).

Follow us on Twitter: @aquaprotocolxyz

Telegram channel:

Telegram community:




Aqua Protocol (Stablecoin on TON)

AquaUSD is the first TON-native decentralised over-collaterized interest-bearing stablecoin backed by liquid-staked assets