WandX: Decentralized Derivatives on the Blockchain

2017 has been an exciting year for Ethereum, as ICOs have proven to be an incredibly successful way to raise capital. Markets-both centralized and decentralized-have grown as tokens for platforms demonstrate their value to users and entrepreneurs. The cryptocurrency space is rapidly developing into a mature, sophisticated market.

As markets mature, there is a need for more sophisticated trading tools. WandX is a decentralized platform on the Ethereum blockchain that will give participants the opportunity to create and trade derivatives on the blockchain, create portfolios of cryptocurrencies that help hedge risk, and create markets for tokenized assets on the blockchain. This article will focus on how WandX will allow users to create and trade derivatives.[1]

The WandX front page

Options and Futures, Blockchain Style

Derivatives are well known by finance professionals and investors, but often scorned by the public. Options contracts are not used by most retail investors, and a high percentage of options expire worthless. They’re extremely volatile-offering high risk and high reward to speculators, yet serve a very important purpose to the market.

Farmers and oil producers are two examples of commodity sellers who buy futures contracts to ensure optimal price forecasting. Futures allow a farmer to have a guarantee he can sell his crops at a certain price. Farmers use these to hedge their income, meaning they’ll pay a small amount of money to ensure they don’t go broke if the price of their crop drops quite a bit, but neither will they get as much extra cash if the price rises a lot. Here’s an example of corn futures.

Who is on the other side of this trade? Remember the classic Eddie Murphy/Dan Aykroyd film Trading Places? That movie featured commodities brokers and a famous scene involving orange juice futures well explained here.

Speculators bring information to the market in the form of bidding. This information leads to price discovery, allowing parties to plan with greater confidence on the future of various assets.

This is the magic of markets: the opportunity for multiple parties to interact, exchange information and risk, and both come out ahead. WandX is bringing this capability to the blockchain!

WandX not only allows the buying and selling of options, but also the creation of them by users!

With options on blockchain tokens, people will be able to trade risk and better plan their futures.
Those who are paid in bitcoin currently have been enjoying a rapidly appreciating asset, but it is unlikely bitcoin will rise indefinitely. During periods of high volatility, bitcoin paid employees will be able to use options to stabilize their earnings, just like farmers do with futures. WandX will help startups and individuals to plan their spending more effectively, focusing less time on price movements, and more time on their core competencies.

WandX's talent pool runs deep

Beyond Bitcoin

WandX wants to put the derivatives markets onto the blockchain-not just cryptocurrencies, which is a much needed market, but “real world” derivative products backed by physical assets. This could include more “conventional” items such as whisky or art. On the more futuristic end of the spectrum is WandX CEO Abhinav Ramesh’sMedium post describing the possibility of energy markets using WandX to trade futures in carbon credits or create markets for recyclable plastic. This is the future that blockchains can bring us!

You can read their white paper, demo their upcoming portfolio product, and get whitelisted for their crowdsale on their website. There are a number of different “rounds” for the token sale, with decreasing bonus levels. You can take a look and sign up to be whitelisted here.

Finally, this is not investment advice! WandX is creating a very cool product using the decentralized powers of the blockchain, and I look forward to their team making some great products. The links below will help you get more acquainted with the project and even ask questions from the team.

Working Beta on Ropstein Testnet (Video)
Link to Beta DApp (Requires Chrome with Meta Mask Installed)
Telegram
Twitter
Medium
Github

[1] You should check out their working beta if you have chrome with Meta Mask installed. You’ll need to connect to the Ropstein network to interact with the DApp, which is very slick. For more information and to see the beta, this video is a helpful look by Mike B.

This article is the first in a series of active collaborations between the team and me. My voice and opinions remain independent.