2019 can be said to be the first year of derivatives trading, achieving a monthly leap from billions to tens of billions. The annual derivatives exchange reached US $ 3 trillion, with an average daily value of US $ 8.5 billion. However, derivatives trading volume is only 20% of spot trading volume. However, some analysts predict that in 2020, the transaction volume will reach more than double the spot price.
What is the development of the crypto contract market in 2020? How can derivatives track players stand out? How to protect the rights and interests of users in Black Swan? On the afternoon of April 13, BBF Fang, the founder of WBF Exchange, was the guest chain node AMA, chatting with the community about crypto derivatives.
- The turnover of Bakkt hit a new high on the day of the 1023 plunge, and the netizens wondered why the organization always went short.
- What do you feel after entering the blockchain?
- After the suffering of the 9/25 tragedy, the 10·23 plunge and how many wealth dreams
- Extreme market challenges major contract exchanges, BTCC contract performance is outstanding
- What is the loss of his position? 1000 BTC, OK started the contract trading battle chain node AMA
- Who can take the lead in breaking the exchange contract?
Traditional financial derivatives vs crypto derivatives
Since its birth, financial derivatives have been regarded as an effective tool to reduce market economic risk and stabilize exchange rate risk in international trade. Its value is based on a variety of basic assets such as exchange rates, interest rates, commodities, credit and stocks. Due to the nature of financial derivatives, the most sensitive essence for traders is risk hedging + speculation.
Derivatives of digital currency are the same as financial derivatives. The underlying asset is digital currency or index, which is a derivative of digital assets. However, Bella Fang pointed out that the design of digital currency derivatives market products is more risky for "gambling tools". The high volatility of the digital currency spot has far surpassed the traditional financial market, and some platforms even support up to 100 times the futures leverage. This undoubtedly turns the high volatility into a "dramatic" volatility, and the risk of liquidation is extremely high.
At the same time, in the settlement of cryptocurrency contracts, except for Bakkt futures contracts that are settled in kind, all others are settled in cash. The biggest problem with cash settlement is that it affects the circulation and demand of digital currencies on the market. The traditional commodity futures all use physical delivery. Due to the high liquidity of assets, there is no regular demand for spot trading, and the demand for hedging of digital assets is also relatively reduced.
However, crypto derivatives also have their advantages. "24-hour transactions, never stop; cross-border flow, no geographic barriers; relatively low transaction threshold, you can pry the disk with very little capital, to achieve wealth appreciation."
For innovation in derivatives, Bella Fang believes:
"Spots, leverage, contracts, options, and financial derivative cores are nothing more than these, plus insurance and borrowing. The so-called new tricks require constant product mix and innovation. But in fact, if it is just conceptual, then In fact, it does n’t make much sense. The “new tricks” that we are concerned about do not require “Shi Shitian”, not “gimmicks”, but they also need to have real value support and very good financial models and product support. ”
Contract: The biggest trend in the digital currency market in 2020
In 2020, the new coronary pneumonia epidemic will undoubtedly have a serious impact on the global economy and is rewriting the global financial landscape. Affected by the contraction of the real economy, the demand for innovative financial instruments will increase unprecedentedly, reflecting the digital asset industry, that is, contract products will gradually move to the mainstream. But on the other hand, the frustration of the stock market does affect market liquidity. In comparison, the current contract market still has room for growth, but competition is much more intense than in the same period last year.
Unlike the low threshold of the spot market, contract transactions naturally focus on mainstream currencies, because altcoins with lower market value do not have liquidity and transaction depth in the contract market, and will be naturally shielded by market rules. From the operational level, contract transactions are convenient and flexible, the principal and profit can be charged and withdrawn at any time, the investment is small, the pledged capital is large, and the return rate is high. Of course, the contract transaction itself needs to have certain investment expertise, but this is the charm of the market, and the volume of the contract will naturally be a multiple growth.
Bella Fang judges:
"Contracts will become an opportunity for the blockchain industry in 2020. Contracts are the biggest trend in the digital currency market in 2020; since the beginning of this year, more and more exchanges on the market have launched contract products. This year will be contracts. In the first year of the outbreak, there was a lot of market space. "
How does the derivatives track stand out?
Crypto derivatives have a bright future, but many pioneers have already taken the lead. In the face of the contract products of the head exchanges such as OK and Huobi, how can they stand out?
She said that the transaction depth is a comprehensive depth, which changes with the market. First, we must ensure that the module is perfect and the operating mechanism is stable; second, the Watt contract of the WBF exchange is connected to the mainstream head exchange, and the depth of cooperation with the top market makers is connected to ensure the perfection of the system.
Regarding the contract product itself, as far as the team is concerned, the Watt contract is well-known and is jointly built by top teams. The Watt contract team is made up of senior financial professionals from the China Securities Exchange, Thomson Reuters and internationally renowned investment banks and hedge funds, and has extensive experience in the global financial derivatives market.
At the same time, WBF launched two major mechanisms of "remaining liquidation of liquidation" and "stepped liquidation", that is to say, when the user does not pierce the liquidation, 30% of the remaining funds will be returned to the user. At present, in the exchange industry, other exchanges on the market are directly into the risk fund account. Compared with the "stepped liquidation and liquidation" mechanism in the market, the "continuous liquidation" calculation adopted by the Watt contract is more accurate and timely, which can effectively prevent unreasonable liquidation caused by price fluctuations and stop liquidation in a timely manner. Protect the interests of investors.
In addition to the return of liquidated positions and the forced liquidation, the order rebate is also a major feature of the Watt contract: buy one bitcoin and below to buy bitcoin. After the transaction, the WBF contract trading platform will return the transaction fee, that is, the maker presses two thousand. A proportion of the party earns a commission to incentivize market makers to provide better liquidity. In addition, the Watt contract uses the ADL automatic position reduction mechanism, real-time settlement of assets, which improves liquidity and transaction depth; the high-performance trading engine developed by the team can reach 5 million concurrent users.
Bella Fang stated:
"WBF has always upheld the concept of 'customer first', and practiced the value of 'doing no evil', and adhered to 'long-termism', hoping to provide digital asset contract users with more friendly, warm and characteristic products."
Extreme market, how to say NO to the downtime Caton?
The current operating rules of the contract trading market are not perfect. Especially in extreme market conditions, the rights and interests of users are not guaranteed, and assets may evaporate at any time. For example, in the previous "3.12" event, the currency price fell sharply, and the fluctuations in the spot market were transmitted to the contract market, which would cause investors to burst their positions.
Bella Fang said that the Watt contract has a strong risk control mechanism. Through the consensus mechanism of transaction data on-chain, separation of hot and cold wallets and multi-signature + member node clearing, it achieves the purpose of asset security and transaction credibility, effectively solving centralized digital Security, trust, and performance challenges faced by asset management platforms. This fundamentally guarantees the safety of user funds.
Under normal transaction frequency, the Watt contract supports millions of concurrency. The specific transaction process also includes matching and liquidation, of which liquidation is the most time-consuming and has the greatest test of the stability of the system.
However, in extreme cases, the instantaneous flow at the peak may be as high as 10 times the usual, the system pressure is very large, and the Watt contract has prepared an emergency backup plan that is completely consistent with the main system architecture. "If the network line fails due to excessively high instantaneous traffic, we can switch to the standby system within a few minutes."
In addition, during peak hours, the Watt contract will also limit the API, which is also a self-stability protection mechanism when the system is overloaded.
Bella Fang stated:
"The ultimate goal of our high concurrency, high availability backup system and other protection mechanisms regardless of cost is to ensure a smooth trading experience."
Female entrepreneur: Why did I choose blockchain?
In terms of technology, the future world belongs to "ABC", namely artificial intelligence (AI), blockchain (blockchain) and gene editing (CRISPR). The blockchain is irreplaceable in the future. It redefines "consensus" and "trust" through the "spatial dimension" and "time dimension", and changes the relationship between people.
Bella Fang has three definitions of the future blockchain: 1. Blockchain is not the next generation Internet, nor is it a value Internet, but a brand new era; 2. Blockchain era is the largest digital migration in human history, a 100 The trillion-dollar market is unfolding; 3. "In the past, I thought AI would devour this world. Now, I think blockchain will devour this world." This also prompted her to choose to invest in the blockchain industry.
"I was involved in entrepreneurship and management in the fields of smart manufacturing and artificial intelligence from 2008 to 2016; in 2016, I founded BlockMedia in Silicon Valley; in the same year, I founded WBF Group on Wall Street; in 2018, I founded in New York The WBF digital asset exchange was officially registered in Singapore in January 2019. Over the past 5 years, I have hosted or participated in various blockchain summits in China and the United States and blockchain hot cities for a long time. "
From the perspective of subdivision, blockchain can be divided into four categories in terms of overall industrial structure: finance, technology, applications and services. The financial category also includes five core tracks, namely exchanges, stablecoins, digital wallets, digital banks, and digital payments.
When it comes to choosing the exchange track, she pointed out that this is related to her in-depth observation of the industry. According to CoinMarketCap statistics, there are nearly 4,000 kinds of crypto tokens in the world; McKinney (McKinney & Company) through a World Economic Forum survey showed that by 2027, more than 10% of global GDP will be stored on the blockchain. With so many cryptocurrency categories and a market share of more than 100 trillion dollars, this undoubtedly brings huge opportunities for digital asset exchanges. Moreover, the blockchain can achieve 7 * 24H cross-border value flow, which is difficult to achieve in traditional finance.
The digital asset exchange, known as the most profitable link in the entire industrial chain of digital assets, is also the link with the most say. "Therefore, we believe that through blockchain technology + Internet innovation + the underlying logic of traditional finance, it will become the biggest window of opportunity in the next era."
Therefore, Bella Fang chose to cut in from the exchange track, integrate the global high-quality resources possessed by WBF itself, and create a new exchange development model with the value of "long-termism", hoping to become a clear stream in the field of digital asset exchange.
Looking forward to the future, she said:
"In 2020, we will complete 18 million registered users. Adhering to the value of" do no evil "and the business philosophy of" long-termism ", our team's goal is to enter the top three global exchanges by the end of 2021.