Smart Contracts Will Disrupt the Derivatives Market

adebits (11)in #blockchain • 7 years ago (edited)

The ability of blockchain protocol also known as distributed ledger technology to disrupt virtually all conventional ways of doing business cannot be overemphasize, this is evidence in how many businesses ideas which can be improved to be more efficient are springing up daily from many sectors like banking, real estate, sharing economy, ecommerce and many more.

Ability to distribute verifiable data is one of the is blockchain’s greatest core value due to the level of verifable transparency that it can provide. Though many are still skeptical about cryptocurrency asset which underlying technology is blockchain but there is great deal of enthusiasm in for incorporating blockchain into a number of leading fields which includes derivatives market.

It is very important to let my readers know that derivatives market is huge and according to Investopedia, the market is often estimated at more that $1.2 quadrillion on the high end. Virtually all type of assets can be traded on the derivatives markets in the form of futures or options. There are commodity and currency futures which represent larger percentage of the futures market while stock options and indices are traded in the options markets. Though the market is gigantic and it continues to grow but the truth is that trading in derivatives market attract high transaction fees which is charged by brokers and other intermediaries thereby making it less attractive and more difficult for investors to make money.

But the good news is that things could change soon as the disruptive force of the distributed ledger technology (DLT) continues to alter many conventional ways of doing business. Blockchain has already had an impact on virtually every industry and now could be the right time to target the derivatives market with the help of smart contracts which are autonomous, self-executing and self-enforcing mini programs .

Smart contracts are best suited for markets that are built on systems with clear rules and quantifiable terms of agreements. Some business sectors that can effectively used smart contracts for their operations are derivatives market, insurance, real estates, government institutions and many more. Several smart contracts can be triggered and work together in tandem to create more complex and sophisticated platform functionalities. At its core, blockchain serves the function of ‘trusted intermediary’ without the overhead, friction, or time associated with an actual company or organization.

A blockchain project called Level01 is leading others in this, it aims to make derivatives trading more efficient by being the World’s 1st Peer to Peer (P2P) Derivatives Exchange with Artificial Intelligence (AI) Trade Matching Technology and Settlement on the Blockchain.

Level01 will allows users to trade options contracts directly with one another peer-to-peer (P2P) without the need for an intermediary broker; with a proprietary system that was designed to leverage blockchain, cryptocurrency and smart contracts technology for automation and transparency in market data, trade contract intent & matching, transactional history, and trade profit settlement.

Level01 will also introduces the concept of the ‘Ecosystem Exchange’ by integrating features that allow users to be rewarded when participating in the ecosystem. This encourages more users to join from the increased liquidity base, thus creating an ecosystem network effect which benefits everyone.

Objectives of Level01 includes:

Simplicity and User Friendliness – By streamlining the capabilities of the platform to prevent information overload, Level01 intends to lower the barrier of entry and remove the complex/intimidating factor of online investing & trading for the layman/novice user. More sophisticated tools for advanced users are carefully designed into the user experience
to be unostentatious and unnecessary for completing trading tasks.
Automated Transparency – The Level01 system is designed and strives for trustlessness and transparency; where the information data (such as time stamps and wallet addresses) of every interaction, transaction process and settlement of trade is publicly available for review and inspection on the blockchain. This ensures Level01 can perform its role as the ultimate trust intermediary satisfactorily.
Ecosystem Orientated – With a focus towards decentralization, Level01 intends to cultivate growth of the largest peer-to-peer options trading network, where every user is recognized individually with proven statistics and ratings. Its ecosystem growth centric features allow users to add value to the network, and derive value from it for themselves. API’s will also be built to allow users on other networks to access the core high value functionalities of the Level01 ecosystem.