Why decentralized derivatives trading?
Over the past few years, decentralized finance is proliferating. The current DeFi total value locked has reached US$51.57B, and this number keeps growing. There are many use cases of DeFi, one of which is decentralized derivatives trading currently emerging. Derivatives aren’t new to crypto, and various exchanges offer this type of trading; anyone wanting to trade crypto derivatives can now do so easily. But why choose decentralized derivatives trading?
Crypto derivatives work roughly the same way as traditional derivatives. In traditional ones, a broker provides the contract and leverage. These contracts can be traded on exchanges. In the case of crypto-derivatives platforms, they act as both the broker and exchange. Decentralized derivatives are slightly different since they don’t require a broker. Instead, the terms of the contract are programmed in smart contracts, eliminating the need for an intermediary.
The flexibility of decentralized derivatives is vast, allowing users to create instruments on virtually any underlying asset. This DeFi use case accounts for 18% of the total value locked of the sector and is now the second most popular category of DeFi dApps after lending.
What are decentralized derivatives exchanges?
Decentralization, in general, is the removal of a central point of control from a system and replacing it with many points of control without affecting the overall integrity of the system. By being decentralized, a system will be trustless and permissionless. Trustless means users have complete transparency and strong control over their funds, while permissionless means anyone can enjoy the service without being limited to a specific jurisdiction.
Decentralized exchanges (DEXs) use smart contracts and non-custodial fund storage to mitigate risks of lost or stolen funds in case of an attack from nefarious actors. This means that this type of exchange doesn’t hold the user’s funds, giving them complete control over their assets. Decentralized derivative exchanges add another layer of complexity to a normal DEX, such as creating a perpetual contract on a DEX.
Perpetual contracts are one of the most popular forms of derivatives trading for crypto-based assets. Perpetuals are like the traditional futures contract in that trader’s either long or short positions in anticipation of predicting the future price of the underlying asset. One key difference from futures is that perpetuals don’t have a settlement or expiration date.
Cross-chain crypto derivatives trading on CDzExchange
CDzExchange is a decentralized crypto derivatives exchange that aims to solve the problems of DeFi platforms, such as high fees and poor user experience. Through this platform, users will be able to trade decentralized perpetual contracts, stablecoins, and cross-chained assets in the form of BEP20 tokens.
Powered by Binance Smart Chain, CDzExchange is able to perform token swaps, staking and liquidity mining with low fees. This is also coupled with high transaction speeds to carry out smoother DeFi experiences.
Conclusion
Decentralized derivatives trading offers a whole new opportunity for new and existing DeFi users, providing them a new avenue to grow their funds. CDzExchange is improving the way crypto derivatives are used in the Defi ecosystem by improving cross-chain interoperability.
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