Thread by @SlawTeh

1/ Volumes on global derivative markets are some large multiple of global spot markets - maybe 20X by my SWAG reckoning. Crypto futures are wildly successful products. The options side is developing. Also, there is the whole push to DeFi.

So what about Derivative DeFi?

2/ Sounds like a reasonable investment thesis. I have bought several projects in this space and see them working hard to develop out product offerings that attract volume as scale.

3/ In the real world, derivative market places can be siloed because customers guarantee margin obligations and the brokers underwrite the customers. The promise of cash to settle up margin is sufficient.

4/ Centralized crypto derivatives platforms replace the credit officer and customer guarantee with a liquidation engine. Accordingly, customers favor the exchanges with very liquid cash and derivatives market in the hopes that liquidation wicks are less severe.

5/ Because of this herding, a small number of centralized exchanges generate a large percentage of the volume, reinforcing centralization as a risk.

6/ Decentralized crypto derivatives protocols are siloed away from the cash markets. They try to institute oracles often with wvap / twap prices and fancy bonding curves into their liquidation mechanics.

7/ They have too because a simpler approach to margin requirements and liquidations would cause great rektage. Why? Each silo’s specific derivatives market suffers from illiquidity, and the cash market is approximated rather than adjacent, easily-accessible and highly liquid.

8/ The point I’m trying to make is that the optimal DerivDeFi protocol needs to be bundled with a DeFi protocol. While the cash market may not need the derivatives market, an efficient, highly liquid derivatives market greatly benefits from an at-hand cash market.

9/ To achieve the decentralized part of DerivDeFi, the protocol ideally would run on decentralized nodes which are independently aware of the state of every one of the protocol markets.

10/ While decentralized doesn't need speed per se, trading does so the protocol should operate in a fast block time environment.

11/ It almost sounds as if idealized version of DerivDeFi should exist on its own chain with native assets, liquid pools of non native assets, and the ability to synthesize any asset. Derivatives are just a subset of synthetic assets after all.

12/ Where could we find such a project - one that offered the necessary combination DeFi, DerivDeFi, a timely, stateful blockchain?

@Thorchain with its native token $RUNE.

13/ Thorchain will offer the basic DeFi products - LPs, borrowing and lending. It is developing fully collateralized synthetics.

14/ Since Derivatives are synthetics, expect in due time, futures, options and a large array of other derivatives that mirror traditional market products, such as structured notes, cash flow factoring / tranching, and so on.

15/ Thorchain is the only protocol that offers these products to native BTC holders. It will easily have the most liquidity. This project has all the makings of the idealized DeFi+DerivDeFi protocol with an exceptional amount of native liquidity.

16/ Also, it will have the opportunity to cherry pick any other DerivDeFI product offering, fast following as necessary. Deep liquidity. All the best in class product offerings. Thorchain could easily dominate DerivDeFi

#RAISETHECAPS