Derivatives Markets on the Blockchain
The Ethereum Blockchain is all purpose.
Applications do not necessarily need to revolve around any area in particular. Contracts exist in all aspects of life, and so can smart contracts. Finance is one area of strong experimentation involving the Ethereum blockchain. This makes sense since many financial contracts, be they simple or multi-party, can be easily transposed to computer code. They also benefit from living on a decentralized network and a trustless system.
It can be said that many financial contracts are uniquely suited to Ethereum. One particularly promising project is Velocity. Co-founder of Velocity, Daniel Cawrey describes his new project in an interview with ETHNews below.
Q. Daniel, what is your project?
A. The project is called Velocity. We're building decentralized derivatives using smart contracts. The first instrument on Velocity will be a simple collar option. You can read more about this instrument in the whitepaper we've published.
Q. When is the expected launch date?
A. We will be doing demo testing and a community-building token sale throughout the balance of 2016. We are expecting real contracts to go live in 2017.
Q. What advantages are there to using a decentralized network over a centralized one?
A. One is censorship resistance - anyone globally can use this platform. Another is with no third party involved, the risk of loss because of external factors diminishes. Also, the cost of using this platform should be less than centralized systems.
Q. Who is in your team and what experience/expertise do they bring?
A. Vignesh Sundaresan, co-founder of Bitaccess, a bitcoin startup that went through Y Combinator in Summer 2014. Daniel Cawrey, former COO of micropayments platform ZapChain, former contributing editor for CoinDesk. We also have the backing of Bitaccess as an engineering provider.
Q. How has the response been to the project so far?
A. The response has been great! We've been working quietly on this for some time, but we've recently been writing some thought leadership on our blog, and the response to what we've been publishing has been nothing but positive.
Q. What inspired you to start this project?
A. We've been working on bitcoin-related technologies for some time. Building a platform for decentralized derivatives sort of became the next step as we were determining the future of this industry.
Q. What made you choose Ethereum over similar platforms/technologies?
A. We've looked at some other smart contract-based systems, but Ethereum at this point has the largest number of developers concentrated on it. Plus it is decentralized, which meets our criteria for what we're trying to build.
Q. Who do you expect to use your platform and why?
A. The first use case will be speculators using the platform when they think they know the price movement of an asset. This is something needed in the digital asset industry as the number of cryptocurrencies grow.
Decentralized financial applications on top of Ethereum are being experimented with by the world’s top financial institutions. They are exciting and promising enough that significant companies would allocate resources to them.
It is positive that experimentation is also occurring both in the community and outside of these larger institutions. It is these sort of platforms that, if successful, would ultimately change the playing field for financial contracts in a meaningful way.