Token derivatives is a broad term for any financial asset whose value is based on a token.
For example, a perpetual is a really simple token derivative. It's just the value of the token times the amount of leverage chosen.
And options are another common type of derivative. But we can get much fancier. What if you want a hold BTC but automatically sell it into USDC as the price drops? Or a position that is worth $1000 if the price of BTC moves up or down by $1000, but zero otherwise. How much should that cost?
Our smart contracts can build those for you and automatically price a fair funding rate for you.
Convexity is a powerful concept used by professionals in every corner of the TradFi world. In our case, this is the key principal that allows so many of unique protocols possible. We figured out to turn it into a simple DeFi primitive and hand that power over to our users in easy-to-understand ways.
Why are Token Derivatives Important?
It's all about the end game. Right now, we're super excited for our first wave of protocols. But if we look towards the future, Token Derivatives play a crucial role in mass adoption.
RWAs will bring all sorts of asset on chain: treasury bills, tokenized stocks, corporate debts, etc. But by definition, RWAs aren't doing anything new that regular retail can't do off chain; they're an off-chain asset, accessible on-chain. The reason people will come to DeFi though, is because they use those assets in ways they could never in TradFi. One of those things is payoff structuring.