Decentralized finance (DEFI) —it’s the notion that crypto entrepreneurs can recreate traditional financial instruments in a decentralized architecture, outside of companies’ and governments’ control. And with fresh allegations of misused funds against the centrally controlled cryptocurrency tether, the argument for decentralized applications has become even more relevant.
More than $50 billion worth of crypto assets have been deposited/staked in Ethereum/BSC/HECO based DeFi applications since July 2020 and it is still growing at an unprecedented rate. With traditional companies like Tesla, Fidelity, and Citadel entering the space, financial tools such as options will be critical for mass institution adoption. Many users have been drawn to DeFi due to the high USD-denominated yields offered on DeFi lending platforms, touting these as superior to the low interest-rate FDIC-insured accounts in which many Americans have their savings. In truth, it is well accepted in finance that high yields reflect the significant risk inherent in using such protocols, such as smart contract hacks, hard forks, flash crashes in the price of collateral, and liquidity crises in DeFi. Indeed, hundreds of millions of dollars have already been lost in smart contract hacks.
Despite the popularity of high leveraged future trading in the crypto space, options trading still offers some unique benefits in providing both high leverages while avoiding force liquidation during high volatile market moments. Seaweed Finance is aiming to build an On-Chain Option Trading platform to satisfy the demand of options trading in the DeFi world. The project known as Seaweed Finance (SWF) will initially be launched on HECO for better user experience.
The derivative market is trading at 100x volume in comparison to the spot market in the traditional financial system. As assets moving toward digitalization and continuous mutuality of Defi infrastructure, the new paradigm of a future global financial system emerges in the age of rapidly growing inflation. Decentralized spot markets like Uniswap, MDX, and Sushiswap delivered a promising spot trading platform, and Oracle like Chainlink enables on-off chain data interaction laid down a solid foundation for Seaweed. Start with HECO native assets like HBTC, HETH, and HT, Seaweed is bringing new financial instruments to the Defi ecosystem.