Crypto derivative instruments

[PercT4b]

Might seem like a complicated question but I will try my best to make it clear:

I think everybody knows the concept behind a derivative instrument, an asset that emulates the price movement of the original one, allowing other people to trade it even if they don't directly own the original asset (instruments like Futures, CFDs).


So, the question is, are there any crypto versions of derivative instruments that work exactly like the ones present on the traditional market?....In my opinion, I think that a wrapped token could be a good candidate to be considered like a sort of "derivative instrument", we are talking about a token that emulates the behaviour of the original one and "modified" in order to make it usable for people who operate in a different blockchain.


Are there similar instruments that work like wrapped tokens?

[Upgrade00]

Wrapped Bitcoin or ethereum are altcoins which tries to mimick the value of the two currencies, I would personally not use them and would much rather buy the actual Bitcoin over a cheap replica which offers liquidity on a different chain.
The algorithm of Bitcoin is actually one of the major distinguishing factors, if we take that away, the currency has very little value.

Bitcoin futures are the closest options I can think of which exposes one to Bitcoin without them needing to buy an actual coin, and it is mostly useful for those investors who cannot own them directly or the process is time consuming, but they are not tokens or coins

[odolvlobo]

A derivative is much more than just an asset that emulates the price movement of another.

Regardless, Bitcoin has a very limited ability to implement wrapped tokens and derivatives on-chain, but it should be possible to develop side chains with those features.

[pooya87]

There is no point.
Simply because you can't create a unbreakable connection between bitcoin price and whatever token you end up with. This is the same flaw that the tokens such as "wrapped bitcoin" suffer from, for example when you swap 1BTC for 1 WBTC there is nothing guaranteeing that in the future you'd be able to swap it back or even at the same rate you may be forced to dump your 1 WBTC for only 0.001BTC.

[dkbit98]

Simply because you can't create a unbreakable connection between bitcoin price and whatever token you end up with. This is the same flaw that the tokens such as "wrapped bitcoin" suffer from, for example when you swap 1BTC for 1 WBTC there is nothing guaranteeing that in the future you'd be able to swap it back or even at the same rate you may be forced to dump your 1 WBTC for only 0.001BTC.

I think that Bitgo company is vouching (for now) that price peg for Bitcoin will stay the same, but what happens if in near future Bitgo goes bust or broke?
Peg is lost and WBTC tokens becomes worthless, and reading latest Gavin Andresen shitposting, I am thinking that someone is planning just that, moving of Bitcoin to other ''better'' chains with purpose of slowly killing it.

Regardless, Bitcoin has a very limited ability to implement wrapped tokens and derivatives on-chain, but it should be possible to develop side chains with those features.

Sidechains already exist, but they never become more popular, even if some are trying hard (read Liquid by Blockstream)
Good resource for that is Jameson Lopp website:
https://www.lopp.net/bitcoin-information/other-layers.html#sidechains