The Rise of Decentralized Trading and Decentralized Derivatives Trading
According to statistics from Dune Analytics, the decentralized derivatives exchange SynFutures has topped $3 billion in cumulative trading volume and 55,000 total clients. As users want to diversify their DeFi investing strategies, the marketplace for decentralized crypto derivatives is increasing. Decentralized derivatives exchanges like dYdX and Synthetix have seen early success, but the market potential is still largely unexplored. Additionally, many of these platforms impose restrictions on which assets or trading pairs may be listed, making it difficult for some traders to access or actively participate in the market.
Rachel Lin, CEO and co-founder of SynFutures, said:
$3 billion in cumulative trading volume is a good starting point, and we believe that behind the number, we have good quality traction and the potential for future growth.
Users may trade trading pairs through Metamask with SynFutures, whether it’s large-cap cryptocurrencies, altcoins, stocks, gold, indices, or any other asset. The platform democratizes the way derivatives are listed and traded by allowing anybody to list any pairings with a single asset in only two clicks. SynFutures presently has over 150 underlying pairs, making it the most comprehensive offering in the decentralized derivatives industry.
Earlier, Rachel Lin, the CEO of SynFutures, discussed the importance of investor protection and the rise of decentralized trading with Hackernoon.
Decentralized Derivatives Trading - The Future of Capital Markets
Permissionless trading, permissionless marketplace development, and permissionless market-making are the three fundamental components of the decentralized finance (DeFi) market. The last two are critical for the DeFi derivatives market to expand effectively and increase returns for liquidity providers.
Due to the sheer maturity of on-chain Web 3.0 wallets and their acceptance by practically all DeFi protocols, permissionless trade has been the most extensively embraced so far. Decentralized marketplace formation and market making, on the other hand, are relatively new capabilities offered by automated market makers (AMMs).
AMMs, on the other hand, hasn’t resulted in comparable decentralized marketplace construction and development in the spot and derivative markets. A market for any asset coupled with any other asset may be formed on the spot, and if such a pair does not exist, a swap can still be done by routing through an intermediate asset like USDC. As a result, the market is adaptable and simple to incorporate for tokens.
However, this is more difficult in the derivatives market. As a result, a variety of methods have been developed. One possibility is to produce everlasting on-chain liquidity using a virtual liquidity machine to create a consistent product that can offer both long and short liquidity. This approach eliminates liquidity provider concerns by entirely removing the liquidity provider (LP) from the equation. However, this shifts the risk from the LP to the protocol.
LPs can and desire to employ a liquidity provision strategy is the key to permissionless derivatives. The liquidity issue for derivatives would be solved if a protocol could resolve the product-market fit question. Inverse contracts are an example of a perpetual product. These allow dealers to trade in their own tokens rather than relying on stablecoins. Similarly, LPs can offer liquidity.
The DeFi derivative market may be scaled via inverse perpetual. They enable everlasting contract generation denominated in any asset, from stablecoins to crypto-assets, LP tokens to index assets, provided a price oracle. For example, protocols and decentralized autonomous organizations (DAOs) have had a lot of success in DeFi 2.0 by building a use case for LP tokens. The allowing of all crypto assets in derivatives follows a similar growth trajectory.
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