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xDFi Genesis Phase Deposits are now LIVE! We’ve just opened up the 100K cap for xDFi deposits.

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NEW LEAK: Price sheet of 200+ crypto influencers and their wallet addresses from a project they were recently contacted by to promote. From 160+ accounts who accepted the deal I only saw <5 accounts actually disclose the promotional posts as an advertisement.

Occasionally Priced Assets and Futures Markets Futures markets are better than perpetuals for many use cases, but nobody in crypto realizes it. There is a massive opportunity for someone to build an Exchange for Everything, powered by futures settlement. Crypto participants are primed to think that perpetuals are the only way to create a delta-one (i.e. linear-exposure) derivatives market. However, for most products that lack 24/7 pricing -- and more generally for any Occasionally Priced Assets -- expiring futures are actually a better fit. Combining this with order books on a high-performance blockchain will produce a future killer product. Background Perpetuals markets generally require 24/7 pricing data in order to implement the funding rate mechanism which keeps the perpetual future tracking the underlying asset. In the funding rate mechanism, the perpetual's price is compared to the spot price and, if this deviation is systematically positive (negative), longs (shorts) pay shorts (longs). Although elegant, this mechanism requires continuous pricing. It is also subject to errors in measurement - for example, there are well-documented cases of traders making tiny trades in order to bias funding rates. Meanwhile, traditional finance is dominated by futures markets. Futures track spot prices because futures positions ultimately expire, at which point a short position must deliver the underlying asset (or an equivalent amount of cash) to a long position. Expiry is an elegant means of creating a relationship between the futures and the underlying. If the futures price deviates too much, an arbitrageur will put on a position that fades the deviation. For example, if the futures price is too high, the arbitrageur will go short the future and long spot. The arbitrageur can then wait for it to converge, or worst case wait until expiration. The expiration mechanism is what holds futures prices in line with spot prices. In practice, very few positions are actually held into expiration and delivered, but the threat of it is what creates the linkage to the value of the underlying asset. Why crypto derivatives are mostly perpetuals Crypto participants are hard-wired to think that perpetuals are the only kind of derivative that works in crypto. We all tend to imitate what they know, which in the case of crypto is perpetual futures. And perpetual futures do make sense for cryptoassets because there is a plethora of spot data to power the funding rate mechanism. But one of the benefits of crypto is that it enables the creation of permissionless markets. It would be silly if the only permissionless markets that can get created are markets on data that already is crypto-native. Expiring futures allow financial markets to extend themselves to trade completely new products. In TradFi, for many asset classes, such as corn, wheat, lean hogs, crude oil, gasoline, or natural gas, futures are the only liquid market. Each of those markets was bootstrapped from basically nothing using the expiration mechanism. Occasionally Priced Assets I would like to advocate for another class of assets, which I'll call Occasionally Priced Assets (OPAs). Many assets are OPAs. Physical commodities are OPAs. Equities are OPAs. In some sense, the topics of most prediction markets are OPAs. Anything that has a price occasionally-but-not-always is an OPA. OPAs fit most naturally as expiring futures. An OPA only needs the price at expiration, at which point it can be cash-settled. Futures are the lowest-friction way of bringing all Occasionally Priced Assets, including major real-world assets like equities and commodities, on chain. What about expiry management? We can borrow lessons from traditional finance. Futures exchanges list calendar spread ("roll") contracts that represent a position of +1 (near calendar month), -1 (far calendar month). Anyone with a long (short) position in the near month sells (buys) a calendar spread position to convert the position into a long (short) position in the far month. Instructions to auto-roll could be encoded in a smart contract. Managing open interest across calendar expiries as an exchange may sound daunting, but in practice it's a known problem. What about margin? Risk management is one of the biggest jobs for any exchange. This is true regardless of whether or not exchange assets have external data sources to mark to, but it is made more clear when a market can only be marked to itself. As an exchange operator, you need to know the max % that any of the assets may move in one day. Margin limits are set accordingly. For example, on CME, if corn prices are expected to not change by one day by more than 10%, then a roughly 10:1 margin is allowed. In TradFi, exchanges also implement circuit breakers to temporarily halt trading if price deviates from the start-of-day price by more than expected. This gives traders time to reconsider or add margin. As with the calendar spread problem, we can lean on TradFi for inspiration. Order books Order books are the intuitive mechanism for liquidity providers to express their markets. AMMs require a liquidity provider who doesn’t mind being picked off, which requires high emission-based incentives for liquidity providers, or (in the case of memecoins) requires part of the genesis supply of the memecoin itself to be locked into the AMM. Order books allow for sustainable liquidity provision, where liquidity providers quote precisely according to their fair values, earning spread from the deviation between fair value and their quotes. Order books also force liquidity providers to compete the spread down, thus leading to better markets for takers. Order books especially fit well for futures. Futures prices drift over time as time-to-expiration shortens, and it’s most intuitive for the liquidity provider to simply price that accordingly, rather than trying to encode it into a complicated AMM formula. More generally, derivatives need extreme precision in pricing, since leverage magnifies the impact of gains or losses. Conclusion Crypto offers many benefits - borderless access to tools for personal finance, and censorship-resistant asset ledgers. However, these tools are not being utilized at all to their full potential if the only investable assets are other cryptoassets. Anything that has an occasional price is a great target for creation as a futures market. In some senses, a futures market can be thought of as a prediction market with leverage. As someone who, in a prior life, traded between 10 and 50 billion dollars of daily notional in futures volumes, I can attest that futures contracts unlock immense efficiencies, and that details like the expiration were only top of mind a few days per year. With futures, anything that can be eventually priced can be traded now. Whoever solves the challenges introduced by expiring futures will capture a huge opportunity.