Derived is a brand new platform for derivatives trading built on Polkadot. It left stealth mode in April 2021. So far many of the details are not yet revealed. However, the platform which Derived is building looks promising.
Functionalities
The Derived Whitepaper was published in April on Github. Derived wants to introduce leveraged trading of synthetic assets on Polkadot. For this purpose it is using the Substrate framework. Substrate is a technology by Parity that allows applications to create custom blockchains tailored to their needs.
Tokens that are issued on Derived are called synthetic tokens and represent the value of real assets such as stocks, commodities or precious metals or of digital assets such as Ethereum and Bitcoin.
The value proposition of Derived focuses particularly on the following elements:
- A lean UX design making it easy for the user to engage with synthetic assets
- Low gas fees through building on the Polkadot platform
- Hybrid tokens which allow investors to obtain exposure to a variety of assets through buying one single synthetic asset
Trading of synthetic assets on the Derived platform incurs a fee of 0.3% which will be awarded to the $DVD token holders. $DVD represents the native token of the Derived platform. Details on how to acquire $DVD tokens have not been announced. However, prospective investors can follow Derived on Twitter and Telegram.
Token Economics
The $DVD token will be used for minting stable coins on the derived platform such as xUSD. The minting of xUSD happens identically as the minting of $DAI through staking $ETH on the Maker Protocol. In case insufficient collateral is added the account will get liquidated automatically.
Token holders that will use $DVD for minting stable coins will receive staking rewards. Furthermore, the staked $DVD tokens will be entitled to obtain the trading fees collected on the Derived platform. In the initial stage of the platform providing liquidity will also be rewarded with $DVD tokens.
The $DVD serves on top as a governance token for the Derived platform. Token holders particularly can decide about the addition of new synthetic tokens to the platform.
Competition
Synthetic assets already exist on blockchains and have been introduced by a number of protocols. The most popular options currently are:
- Synthetix – based on Ethereum
- UMA – based on Ethereum
- Mirror Finance – based on Terra
- Horizon Protocol – based on the Binance Smart Chain and already covered by Frontier Protocols
Conclusion
Synthetix assets are one of the most demanded use cases of blockchains. Increased gas fees on Ethereum have made it harder for retail investors to engage with protocols offering derivatives trading. Derived is leveraging the Polkadot ecosystem to build a unique derivative trading experience. Additionally, Derived supports a multi-chain approach bridging Polkadot, Ethereum and the Binance Smart Chain.