The derivatives market is the biggest trading market in the world, estimated at a stunning $560 trillion in 2019 and accounting for more than 70% of the world’s overall trades
The derivatives market is the biggest trading market in the world, estimated at a stunning $560 trillion in 2019 and accounting for more than 70% of the world’s overall trades. Within that segment, the crypto derivatives niche is one of its fastest-growing subsets, reaching a total trading volume of $5.5 trillion in May 2021.
At present, the vast majority of those crypto derivative trades take place on centralized exchange platforms such as Binance and OKEx. But while CEXes were the first to capture the market, those platforms are hindered by several disadvantages that make them a poor bet for the future, with many investors wary of their lack of opaqueness, operational inefficiencies and the danger of regulatory risk and insolvency.
This is why so many in the industry are betting on a very bright future for decentralized crypto derivatives trading platforms. They’re growing fast too, with trading volumes rising from almost zero in early 2020 to more than $160 billion in May 2021. Even so, such platforms command less than a 5% share of the overall crypto derivatives trading volume at present, showing there’s a lot more room for decentralized platforms to make their presence felt.
Looking to disrupt this fast-growing and extremely profitable market is the SynFutures DEX, and it boasts a unique, single-token model that looks to give it a strong advantage over rival DEXs.
SynFutures is still a relatively new project, having only released its whitepaper in November 2020. Yet it has made rapid progress, launching its closed alpha just seven months later and raising $14 million in funding.
SynFutures’ ultimate goal is to become the Uniswap of the crypto derivatives world and it’s doing so with a user-friendly model that allows users to list futures contracts in a permissionless way with a few clicks, compatible with as many trading pairs as possible. To that end, SynFutures is designed to be multi-chain, running on Ethereum, Arbitrum, Binance Smart Chain and Polygon, with plans for many more to be added.
The beauty of SynFutures is its Synthetic Automated Market Maker, which is based on Uniswap’s own AMM model that made it possible for traders to create trading pairs by providing liquidity in the two assets.
SynFutures’ sAMM model goes one step further though, allowing users to provide just one asset of any trading pair, with the second being automatically synthesized by the smart contract. As an example, if one BTC is currently worth $30,000, the user can supply liquidity simply by depositing $60,000 USDT into the trading pool. That way, the other $30,000 USDT provides a margin to represent one BTC in the shape of a long futures contract, meaning the user is exposed to a derivatives position. The sAMM will then automatically enter the short position for an equal amount when the long position is created. Those two positions then counteract each other.
The main advantage of using a single asset is there’s no added risk for users who would normally have to add two assets to the liquidity pool. By providing only one asset, liquidity providers can lessen their exposure to market risks in a hassle-free way.
There’s every reason to think the decentralized crypto derivatives market is poised for substantial growth given its current low market share, but DEXs will only succeed if they can attract sufficient liquidity. With its unique, lower-risk approach, SynFutures, therefore, has the potential to make a real impact. With its mainnet up and running since Q4 of 2021, and the second version of its protocol set to launch this year, the project will be an interesting one to follow.
Will it succeed though? As with anything crypto-related, that’s a tough question to answer. Like with all derivatives, only the future will tell.