Decentralized expiry futures trading is going live on Injective. This means that starting this week, the Solstice Pro Testnet will provide access to new trading opportunities such as stocks that only helps to expand the capabilities of Injective.
What are Expiry Futures?
A future is a derivative contract that requires parties to transact an asset at a predefined future date and price. This allows traders to lock in a future price of the underlying asset itself.
An example of this can be found in the crypto markets. Let’s assume the price of Bitcoin today is $30,000 but you assume that in 3 months the price will be $40,000. You can purchase a futures contract today at 30,000 on leverage to lock in that price. This implies that when the price reaches $40,000 you can attain an ROI that is significantly higher than if you had simply purchased a long position on Bitcoin on the spot market.
An expiry future is essentially a future with an expiration date attached to it. So the futures contract will remain valid until this date is reached.
When the date is reached, the futures contract will settle and your position will automatically pay out against the final price. Going back to the Bitcoin example above, you will be paid the $10,000 difference plus any leverage you may have taken on when the price reaches $40,000 by the expiration date.
On the other hand, if Bitcoin does NOT reach $40,000 by that date you will earn a lower payout relative to your initial investment.
What Issues Exist in the Expiry Futures Sector Today?
In traditional finance expiry futures are normally accessible to only sophisticated investors. In addition, a number of barriers exist with new users wanting access to this asset class. At times this involves passing tests and having a predetermined net worth or income. This of course means that the majority of retail investors will never be able to access futures trading.
The crypto sector aimed to solve this but has largely failed to do so. Crypto futures remain largely on centralized exchanges which place many of the same restrictions on users as their traditional finance counterparts. So, once again the majority of the world is left unable to access these assets and are left out of a potentially lucrative avenue for achieving a higher ROI.
A few decentralized platforms have attempted to enter this sector but their underlying infrastructure usually suffers from having slow speeds and high speeds, rendering these solutions largely impartial for trading. This is why futures trading volume in the crypto industry continues to flow to centralized exchanges despite their many restrictions and high costs.
Injective’s Pioneering Decentralized Expiry Futures Implementation
Injective is the first protocol to enable fully decentralized expiry futures trading that is able to resolve all of the aforementioned issues in the space today.
Due to its fully decentralized nature, Injective does not restrict any individual from accessing futures trading. So regardless of where you may live or what your income may be, you can access Injective’s futures trading. This leads to a truly democratized financial world where new asset classes or trading opportunities are given to all and not just the wealthy few.
Furthermore, the Injective Chain was developed to specifically cater to derivatives trading. The chain is able to attain extraordinarily high throughput while offering zero gas fees for transactions. This means that trading futures on Injective is not only fully decentralized but also practical for both retail and institutional investors alike.
Perhaps one of the overlooked benefits of expiry futures is their ability to be executed regardless of liquidity. This is because when a futures contract is settled, a counterparty is not needed since the open interests are already claimed against one another. So your position is guaranteed to close even if the market is trading at a discount or premium with low levels of liquidity.
Looking Ahead: Unlimited Markets on Injective
This is a big step towards the creation of a fully decentralized derivatives exchange. Now users can create not only crypto native futures markets but also a plethora of others that are not available elsewhere. This includes synthetic assets such as stocks and forex along with prediction markets as well.
A number of new markets in the coming weeks will be pursued, contributing to an ecosystem within DeFi that is truly decentralized with limitless potential.
Injective is a custom interoperable layer one protocol for building powerful exchange, DeFi, derivatives & Web3 applications. Injective was created using the Cosmos SDK and is able to achieve instant transaction finality while sustaining lightning fast speeds. INJ is the native deflationary scarce asset that powers the Injective Protocol and its rapidly growing ecosystem. Injective is incubated by Binance and is backed by Pantera Capital.