We make it unbelievably easy for financial institutions to trade derivatives and manage financial risk
EthosX makes it easy for crypto companies and financial institutions to sell on-chain derivatives to their customers and trade with each other. For example, using EthosX’s options infrastructure two hedge funds can trade high-value on-chain options with each other directly without involving any banks or brokers with zero counterparty risk and zero settlement risk.
Global derivatives ecosystem is broken. Derivatives trading in traditional finance has way too many gatekeepers and intermediaries. This leads to inefficiencies and things falling apart every other day. As insiders, we have seen how much everything hangs by a thread. With USD 600 Trillion dollars (notional value) at stake, one would expect things to be better, but they aren’t.
Crypto was supposed to be free of these issues and a solution to all of this, but it is itself getting more and more centralized with disastrous consequences, as was clearly evident in the last few months. With every other crypto exchange/bank running away with user’s funds, one can hardly blame the users/traders/investors if they don’t trust centralized entities for complex products like derivatives.
We are bringing the entire derivative trading lifecycle on blockchains end-to-end (trading, clearing and settlement).
Institutions can trade directly with each other on-chain via smart contracts created by us without involving any banks, brokers or exchanges. These trades have zero counterparty risk as the net payoffs are locked in the code. The settlement of these derivatives is automatic and done with the help of on-chain oracles and therefore the settlement risk is also zero.
We are also adding a Request-For-Quote system which will help bring more liquidity to these trades.
Now, due to regulatory and technical reasons, this cannot be done yet for traditional finance derivatives, so we are starting with cryptocurrency derivatives first and will eventually go towards traditional finance as well.
We are providing derivatives infrastructure to other crypto companies as well who want to use these products as a part of a larger package to their customers. E.g. DeFi lending protocols can offer liquidation protection to their borrowers using our solutions.
We have also created perpetual options which are live (testnet) on our website and can be traded by retail traders and institutions alike. The instructions to trade them are here.
Together we have spent nearly 15 years in quantitative finance and have seen, very closely, all the points where the derivatives ecosystem falls apart. Deepanshu was a Vice President at the Quantitative Research team of JP Morgan Chase and Smit was working at a quantitative hedge fund trading options before they came together again for EthosX. It is kind of an open secret that blockchain tech can potentially eliminate many of the issues in derivatives life-cycle which have persisted for years/decades.