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Decentralized finance (DeFi) is one of the most dynamic sectors of the global economy to date and its growing with increased interest in various derivative assets.



According to analytical agency Messari, trading volumes on decentralized exchanges (DEXs) in the second quarter of 2021 have shown a 117 times increase. This is in comparison to the same period last year and 83% growth over the first quarter. 



Trading volumes on decentralized exchanges exceeded 10% of the volumes of centralized exchanges for the first time since October 2020. In essence, DEXs are slowly but surely occupying the market share of their centralized counterparts.



However, quantitative indicators are not the only factors to consider. There are also qualitative changes to take into account. Crypto market economics started off with the simplest of financial transactions like buying, selling, and storing assets. 



Replicating TradFi in digital assets



Still, the tools available to crypto investors have expanded dramatically over the past two years. The trend is obvious as crypto market players are trying to replicate the full scope of traditional financial services in the digital assets economy. 



For the cryptocurrency market, which has traditionally been characterized by high volatility rates, such instruments are becoming especially important. Cryptocurrency derivatives allow market participants to simultaneously reduce investment risks and make money on changes in the exchange rates of traded tokens.



Equally important is how derivatives provide easy access to earnings on trading assets that can be difficult to acquire on real markets. In the last century, oil futures have opened up wealth to millions of traders who had only seen oil rigs or tankers in photographs in newspapers and television.



The launch of Bitcoin and Ethereum futures trading on leading U.S. exchanges has made it possible for many speculators to make money on such digital assets. Despite the disapproval of almost all central banks towards decentralized cryptocurrencies.



Derivatives attract speculators and institutional investors who provide the market with liquidity. That is why derivatives have become the largest market in traditional finance. According to some estimates, the volume of this segment is at least twice as high as the volume of the world’s money supply.



Bitcoin futures, options, and structured products 



Although in DeFi space, the situation is still the opposite. Since the derivatives segment accounts for only a small fraction of it, the situation is changing rapidly. Messari estimates that perpetual digital asset trading volumes reached nearly $20 billion in Q2 of 2021. Up 155% from Q1 and up about 300% from Q4 of 2020. 



“Decentralized derivative protocols are starting to see strong signs of adoption among DeFi users,” they explain.



The most common cryptocurrency derivatives today are Bitcoin futures. The volume of trading on the main markets of Bitcoin futures has already reached $1.7 trillion. 



The reason is simple, these kinds of instruments trade on large traditional exchanges. Such as the Chicago Board Options Exchange and the Chicago Mercantile Exchange.



Options are another common form of a derivative contract. They, like futures, allow the parties to the contract to determine the terms of future trade in the present and also to get out if prices do not move as expected. 



One of the most popular options trading platforms is Deribit. This is where users can buy and sell derivatives for Bitcoin and Ethereum.



Selling contracts, not crypto



Many crypto brokers provide investors with services for buying or selling CFD contracts (contracts for difference). These are derivatives that act on the difference in the price of the underlying asset. 



At the same time, the trader does not buy or sell the underlying cryptocurrency. They only open contracts for the difference in prices, earning on their forecast, regarding how the exchange rate will behave in the future. 



If the asset has risen in price during the CFD period, the seller pays the difference. If the cryptocurrency has fallen in price – the buyer pays up.



Surprisingly, currency swaps – a very popular form of derivatives on traditional financial markets – have not yet become widespread in the crypto industry. 



Although these are futures contracts with no specific expiration dates that foresee the ability to close the contract at any time. The high volatility of digital assets makes such instruments too risky.



The next step in the development of hedging investment risks was the emergence of the so-called structured deposits. The profitability of such products depends on the degree of capital protection. 



The smaller it is, the higher profitability is. In general, structured products always provide higher income levels than conservative instruments. Meanwhile, the associated risks are much lower than with direct exchange speculations.



A new era of crypto derivatives



The development of new segments of the cryptocurrency economy is leading to the emergence of new derivative products. The best confirmation of this observation is decentralized lending services that connect borrowers with lenders. 



In the past couple of years, this sector has been developing very rapidly. This has been facilitated by the anti-crisis monetary policies adopted by most central banks. 



Cheap money is pouring into the global economy on an unprecedented scale. One of the consequences is a sharp decline in lending rates in traditional finance. Meanwhile, rates can go up to 20% per annum in decentralized lending, providing lenders with fantastic returns by TradFi standards.



Giving and receiving loans in cryptocurrencies has become extremely popular after emerging credit protocols like Aave or Compound. However, the unpredictability of exchange rates, characteristic of the entire crypto industry, is reflected in loan rates. 



This is because they are almost as volatile as token exchange rates. There have been various derivative proposals to address this problem.



For example, the Saffron Finance and BarnBridge platforms are offering securitization of decentralized loans by combining variable rates of return across different lending protocols into separate tranches, each with a different risk/return profile. 



Investors can choose a specific tranche depending on their own risk appetite. Otherwise, they can build their own portfolio of loans with individually calculated reliability and profitability.



Services like Yield and Notional generally give users the ability to borrow and lend cryptocurrencies at fixed rates but for a predetermined time. It is clear that loans are very short-term — a factor that reduces their effectiveness. 



After all, most crypto loans are directed to the stock exchange. If there are no significant market movements during the loan period, it will be problematic to “recoup” it. 



Interest rate options for crypto



In traditional finance, a special instrument exists to hedge the risks of changes in credit rates in the form of interest rate options. These allow the lender to set a floor option. Interest rate options enable companies to protect themselves from adverse interest rate fluctuations while benefiting from favourable fluctuations. 



The emergence of similar derivatives on the cryptocurrency market was only a matter of time, and it has finally happened. The pioneer was Horizon Finance. It offered a fundamentally new interest rate derivative where participants can compete for preferential payment in return for capping their yield. 



The bottom line is simple. An investor can submit their own interest rate bid (yield cap), which they consider to be fair at a given point in time. All of the different bids from investors are aggregated into an order book. Income on the underlying capital is distributed from lowest bid (%) to highest bid (%) until it either runs out or the excess spills over into the floating pool. 



This derivative payoff is at the core of the Horizon protocol. It will be run over rounds of chosen time period lengths (2-week and 1-month initially) that are strung seamlessly together.  



“We posit that in such a game, the ‘crowd’ will collectively act in a rational fashion in an attempt to maximize their individual profit according to individual risk preferences,” stated a representative of Horizon Finance.



There is no doubt that as the financial industry decentralizes, derivatives will become more widespread. Simple buy-and-hold investment strategies will become ineffective. At the same time, the ratio of money and derivatives will be approaching the values of the traditional financial market.
  The post Derivative Assets Are Opening Up a New World of Investment in DeFi appeared first on BeInCrypto.


Decentralized finance (DeFi) is one of the most dynamic sectors of the global economy to date and its growing with increased interest in various derivative assets.
The post Derivative Assets Are Opening Up a New World of Investment in DeFi appeared first on BeInCrypto.


beincrypto.com

Derivative Assets Are Opening Up a New World of Investment in DeFi

  
Indian teenager Gajesh Naik made headlines earlier this year when he built Gaj Finance, a multichain decentralized finance (defi) protocol, which currently manages some $1.2 million in crypto of user funds.



Now the 13-year-old high school student has raised $300,000 in pre-seed funding for his latest DeFi project called Taksh. Built on Avalanche, the protocol aims to maximize yields by “compounding rewards and farming.”



The funding round was led by Ravindra Kumar, founder of cross-blockchain platform Frontier, and other unnamed investors. Naik told Beincrypto.com in an interview that he is planning a public sale to raise additional funding.



However, “considering its liquidity and audit requirements, the project (Taksh) has enough funds to run for 12 months,” explained Naik, who operates from his parent’s home in Goa along India’s western coast.



The Taksh network utilizes cross-chain integrations, yield multipliers, and inclusive mechanics. It will essentially “auto compound rewards” for users, helping them to “maximize their yields and savings,”



Teenage prodigy



Naik comes from a non-technological background, as both his parents are civil servants in India. But he learned to code from the age of seven, and has become skilled in several programming languages including Solidity, the language used to write Ethereum-based smart contracts.



In April this year, the teenager launched Gaj Finance (formerly Polygaj) as its founder and chief architect. Gaj Finance is a DeFi yield aggregator – basically meaning that investors get a reward for their crypto holdings via a process known as yield farming. It is also a non-fungible token (NFT) platform that runs on the Polygon blockchain.



To date, Gaj Finance has around $1.2 million in total value locked (TVL) – that is, the amount of crypto it manages. Naik also has a Youtube channel with nearly 15,000 subscribers, where he helps people learn about cryptocurrencies, coding and machine learning.



Risky business



Decentralized finance has arguably become a paradise for hackers, with reports of attacks and rug pulling now common place. Investors have lost millions of dollars this way. So, does Naik, a 13-year-old boy, understand the extent of the risks involved in DeFi, both for him as a coder and those utilizing his product?



“We have engaged with leading audit firms for the smart contract audits and have followed all the best practices and implemented learnings from all the projects that faced unfortunate incidences in the past,” he avers.



“We are currently in the process to engage more security experts apart from audit firms to enhance this aspect of the project further, as we take security very seriously,” added the teenager. More specifically, Naik said Taksh is working with Solidity Finance as auditors.



Taksh plans to hire more developers and, together with Gaj Finance, expand the project’s product offering within the next quarter, he said. He added that the decision to build on Avalanche, an emerging blockchain, over Ethereum was motivated by cost.



“The platform is able to run dApps (decentralized applications) at a fraction of the cost,” he stressed.



Going forward, Naik said: “We aim to commit some part of the profits to treasury as a grant. Those who want to build on Taksh will be invited to submit an application. Those applications will be evaluated by the committee of crypto veterans first, and later will be put to vote to the community.”



What do you think about this subject? Write to us and tell us!
  The post India’s 13-Year-Old Coder Raises $300,000 for New DeFi Project appeared first on BeInCrypto.


Indian teenager Gajesh Naik made headlines earlier this year when he built Gaj Finance, a multichain decentralized finance (DeFi) protocol, which currently manages some $1.2 million in crypto of user funds.
The post India&#8217;s 13-Year-Old Coder Raises $300,000 for New DeFi Project appeared fir...

India’s 13-Year-Old Coder Raises $300,000 for New DeFi Project

The decentralized finance (DeFi) ecosystem has printed its highest Total Value Locked (TVL) today, riding on the back of the resurgence in the broader market. Per data from DeFi Llama, the TVL covering all blockchain protocols is now pegged at $223.23 billion, a massive uplift from the $21.4 billion recorded from January 1 this year. 
DeFi TVL Source: DeFiLlama
Per the DeFi Llama data, decentralized exchange liquidity pool on Ethereum designed for efficient stablecoin trading, Curve Finance, maintains the largest share of the pie with a value of $17.08 in TVL. Lending protocol, Aave ranks next with a total of $17.02 billion, while Maker also comes off with a total value locked of $15.43 billion. The growth of the DeFi ecosystem has largely maintained an upward trajectory, as more investors, including retail and institutional investors, began leveraging the earning options the emerging protocols that make up the ecosystem offers.
DeFi creates the most direct threat to traditional finance as the emergence of lending protocols for instance has lowered the barrier to entry for accessing loans. Many new investors also find it easy to commit their funds into the DeFi ecosystem as these protocols are governed by smart contracts, which makes them non-susceptible to the lapses of human-fueled organizational management.
Future Growth to be Backed by Mainstream Market
There is a more positive outlook in the broader digital currency industry, fueled by the optimism of approval of the first Bitcoin Futures Exchange Traded Funds (ETF) in the U.S. Per an earlier Coingape report, the ProShares Bitcoin Strategy ETF could be coming as soon as next Monday, October 18, marking an end to the undying anticipation from investors about such a product.
With the advent of the ETF, more funds will be pumped into the entire industry, and there is bound to be a trickle into the DeFi ecosystem. A number of investment managers, including Grayscale, are beginning to provide funds that track the performance of DeFi protocols, opening up additional avenues for more embrace of the DeFi tokens.
Besides the TVL, the tokens of DeFi projects are also seeing an additional boost with all protocols inking a market cap of $137.47 billion according to data from CoinMarketCap.
The post DeFi Total Value Locked Hit ATH as Crypto Market Sees Resurgence appeared first on Coingape.


The decentralized finance (DeFi) ecosystem has printed its highest Total Value Locked (TVL) today, riding on the back of the resurgence in the broader market. Per data from DeFi Llama, the TVL covering all blockchain protocols is now pegged at $223.23 billion, a massive uplift from the $21.4 bill...

coingape.com

DeFi Total Value Locked Hit ATH as Crypto Market Sees Resurgence

The cryptocurrency market has gone mainstream in 2021 attracting attention from not just institutional firms and billionaires but also from countries. First El Salvador created history by making Bitcoin a legal tender in the country which triggered a Domino effect leading to the likes of Paraguay, Argentina, and Panama also looking to legalize crypto use in their financial sphere.
Now Zimbabwe might also join the growing league as the Finance Minister of the country recently said that it’s impossible to ignore cryptocurrencies at this point. The finance minister Mthuli Ncube said nearly 30% of the country’s youths are invested in crypto-assets and it’s impossible to run away from it. According to a report published in Herald, the finance minister has hinted at possible concessions on the crypto market to promote its use. Ncube insisted on using crypto as an investment asset class rather than a currency. He explained,
“But our view is that we do not want it to be a currency. Want this to be an investment class. So through the Victoria Falls Stock Exchange platform, we will try to create crypto-based products there, which are ring-fenced within the offshore zone.”
Zimbabwe Working on Crypto Regulations?
During his interaction in Dubai, Ncube hinted that the Zimbabwean government has already initiated the process of regulating crypto. He explained that the government has started a sandbox program
“We have taken the first step already and created a sandbox, at the Reserve Bank of Zimbabwe (RBZ), where the idea and everything are being tested in a safe regulated environment where it will then migrate to this safe Victoria Falls environment,” Ncube said.
Looking at the growing interest of financially challenged nations towards crypto, the digital assets marker that was seen as an internet bubble is building a new world financial order.
 
The post Breaking: Zimbabwe Finance Minister Says Impossible to Ignore Cryptocurrencies appeared first on Coingape.


The cryptocurrency market has gone mainstream in 2021 attracting attention from not just institutional firms and billionaires but also from countries. First El Salvador created history by making Bitcoin a legal tender in the country which triggered a Domino effect leading to the likes of Paraguay...

Breaking: Zimbabwe Finance Minister Says Impossible to Ignore Cryptocurrencies

Zimbabwe’s increasingly pro-crypto finance minister, Mthuli Ncube, recently told his colleagues in government that it is now impossible to run away from cryptocurrencies. Ncube said this after revealing that some 30% of the country’s youth are now invested in cryptocurrencies. 
Zimbabwe Ready to Make Concessions on Cryptos
According to a report by the Herald, Ncube also hinted that his ministry is now willing to make certain concessions on cryptocurrencies. However, unlike his recent comments in which he simply extolled cryptocurrencies, Ncube insists that these must not be treated as currencies. He explained:
But our view is that we do not want it to be a currency. Want this to be an investment class. So through the Victoria Falls Stock Exchange platform, we will try to create crypto-based products there, which are ring-fenced within the offshore zone.
By referencing the Victoria Falls Stock Exchange (VFSE) as the ideal platform for cryptocurrency transactions, Ncube is echoing sentiments that were previously expressed by Zimbabwe Stock Exchange (ZSE) boss Justin Bgoni.
As reported by Bitcoin.com News, Bgoni suggested at the time that the VFSE was open to listing cryptocurrencies. However, such listings would be subject to regulatory approval, Bgoni said.

Ministry Working on Crypto ETF
Indeed, in his remarks, while speaking at a business seminar in Dubai, Ncube appeared to suggest that this process of approving cryptocurrencies is already in the works.
“We have taken the first step already and created a sandbox, at the Reserve Bank of Zimbabwe (RBZ), where the idea and everything is being tested in a safe regulated environment where it will then migrate to this safe Victoria Falls environment,” Ncube said.
Meanwhile, the same report quotes Ncube revealing that the Ministry of Finance is working with an unidentified investor based in Dubai to create or develop a crypto index. According to the minister, such an index would eventually lead to the creation of a crypto exchange-traded fund (ETF).
Ncube added that Zimbabwe has engaged investors that are working with his ministry to create crypto ETFs.
Do you agree with Ncube’s remarks about cryptocurrencies being unstoppable? Tell us what you think in the comments section below. 



























Zimbabwe&#x2019;s increasingly pro-crypto finance minister, Mthuli Ncube, recently told his colleagues in government that it is now impossible to run away from cryptocurrencies. Ncube said this after revealing that some 30% of the country&#x2019;s youth are now invested in cryptocurrencies. Zimba...

Alpha Finance price	$1.05
Low - High 24H	$1.04 - $1.08
Market cap	$470.33M
Volume 24H	$8.73M
All time high	$2.93 -64.13% February 5th 2021
All time low	$0.026358 3883.59% November 3rd 2020
Genesis date	N/A

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