Perpetual DEX protocols are a growing niche in the DeFi ecosystem. These platforms enable permissionless trading of different digital assets for an indefinite period of time. Given this, any investor can take a long or short position and wait for their predictions to come to fruition. However, perpetual DEX platforms are few and far in-between. Also, the few ones call Ethereum - foremost smart contract network - their home.
This is rapidly changing as Cardano DeFi begins to mature. To even the odds and provide a viable playing ground for Cardano users, Strike Finance is building out a highly robust and powerful perpetual trading platform.
Below, we dig deep into Strike Finance’s offerings and expected roadmap.
Perpetuals Are Now DeFi’s Gold Rush
The decentralised finance ecosystem has come a long way from its early years in 2020. Now, the permissionless trading landscape boasts over $122 billion in TVL with a high growth ceiling still expected.
As mentioned in our intro, Ethereum is the default building space for a large number of perpetual DEX platforms. This is rapidly changing as the popular Ethereum killer, Cardano, makes a stand in the growing DeFi niche.
Strike Finance is the latest effort toward this goal. The DeFi platform is an open-source, user-friendly derivatives service that allows anyone to trade Cardano-native assets.
With it, users can take a long or short position and predict the value of an asset based on the underlying token it is fixed with. Strike Finance is still in beta mode but its potential is quite glaring for everyone to see. For one, it will be one of the few Cardano-native derivatives services around. Ethereum is rife with several of these and Cardano rolling out Strike Finance shows strong intent to fully participate in the ongoing DeFi race.
Even less considered is what Cardano brings to the table - speed, low fees, decentralised model, and optimum uptime - all missing in its close rival. This means, Strike Finance users will be able to place trades when, where, and how they want it without worrying about slow transaction speed, high gas fee, and the network crashing on itself due to the protocol’s reliance on Cardano’s security mechanism.
Key Features
When it goes live, Strike Finance will enable users to:
Options Contracts
Here, users will be able to buy or sell an asset at a predetermined price before a stipulated date. In an options contract, two things are crucial and that is the puts and call options. For differentiation, a put option allows a users to sell an asset at a set price while a call option allows him/her to buy at a specific price. Hence, traders usually place a put option contract when they predict that an asset will drop in value and vice versa for call options.
For its options contracts, Strike Finance initially went the peer-to-peer (P2P) route which allows users to create and trade amongst themselves. However, the limited liquidity on Cardano served as a crucial barrier toward this model. Now, Strike Finance has integrated its options contract with an Automated Market Makers (AMMs) which is trading with a smart contract.
The transition to AMM model has addressed issues around liquidity as users can now provide liquidity directly to the protocol for options trading.
The need to wait for a matching counterparty offer is also addressed as the AMM fills the orders instantaneously. Even better, liquidity providers get to earn a portion of the protocol’s fees while scaling the platform from their active participation. For now, all options trading will be done via the USDM stablecoin - principal decentralised fiat-backed asset on the Cardano network.
Forwards Contracts
Like its name suggest, forwards contracts is a future-oriented event. It basically entails two parties agreeing to a binding agreement on how much the intend exchanging specific assets in the near future. All involved parties are usually bound to the fulfillment of the terms of contracts. Usually, traders enter long positions when price is expected to increase and short positions in anticipation of a decline. But forward contract issuers take a different approach. They take short positions when price is expected to increase, which could allow them to purchase assets at a bargain price in the future.
To execute a forwards contract on Strike Finance, all parties must deposit a collateral. This collateral can only be redeemed once all the stipulated terms of the contract are sorted. In the event one party defaults, the other party can claim their collateral. The $STRIKE native token can be used as an added collateral when executing a forwards contract.
Perpetual Contracts
On perpetuals, Strike Finance allows users to take a position indefinitely on all supported assets. Traders can then earn periodic profits from their positions if they align with the market’s direction.
Staking
Lastly, there is a staking feature on Strike Finance, With this, users can lock-up their $STRIKE tokens to secure the derivatives protocol. In return for doing this, stakers earn a portion of the protocol’s revenue. Rewards become active 24 hours after the initial staking. Even better, withdrawal of rewards can be done anytime as there is no time-lock involved.
So far, 7.18M $STRIKE tokens (about 39.9% of circulating supply) have been staked from 154 unique stakers. A total of 1,628 ADA have been paid out as a result.
Conclusion
The derivatives ecosystem is a multi-billion dollar industry. Strike Finance is tapping into a robust liquidity landscape and offers users a permissionless landscape for them to participate in the financial space. The platform’s launch is one to expect in the near future.
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