Decentralized Derivatives

[samdan777712]

Decentralized Derivatives
I'll preface this first off as usual with admonishment towards people who dislike derivatives. Derivatives are not inherently bad, they are in fact necessary, to think otherwise is financial ignorance. Comingling, rehypothecation, and accounting fraud are bad, and it can be prevented with the blockchain. Don't push bad investing and trading skills onto a market that needs infrastructure.



The big issue is that there will be continued abuses by states and governments attempting to censor and commit fraud and otherwise political and financial repression and unequal laws against the poor by centralizing the derivative market. It is how predatory finance capitalism in America is largely able to control people (the world). Because it is centralized.



Next you have platforms like Kraken that do offer some margin capabilities, but you have extreme counter party risk. Kraken can take your money based off of any stupid pretense, and you are trading against them instead of peer to peer like bitmex. You don't own your keys.



The direction that layer 2 solutions are going in, combined with federated side chains and innovations on top of binance's new chain such as with Thorchain are a much more sensible outcome in the long run. I'll try to explain a few of these technologies

A) Thorchain is probably the most promising since it rewards liquidity nodes on the network and plans to integrate multiple chains and lightning network while using binance chain to jump start the initial dex offering.

b) Tradelayer is a layer 2 solution from the omni layer developer that can be adapted to meet regulations and KYC if absolutely necessary, but allows for non KYC liquidity nodes, and being layer 2 means its definitely proposed to interact with lightning network. It functions similarly to lightning, performing the computation needed for margining and settlement similarly to the many exchanges offchain with lightning.

c) RSK bitcoin smart contracts which will basically enhance anything operating a DEX with liquidity nodes and the need for complex smart contracts.

d) Virtual machines with Ren VM that can process smart contracts and link together liquidity provider



Those are just a few. But with Ren and Liquid swap, they are still largely proprietary and deliberately facilitating corporate clients. This is what bitcoin needs to move away from. We need open source solutions that will perform liquid swaps functions for the masses, for retail.