What Are Tokenized Derivatives and How Are They Enabled by Smart Contracts?
Tokenized derivatives are financial contracts, like futures or options, represented as digital tokens on a blockchain. Smart contracts encode the derivative's specific terms, such as the strike price, expiration date, and settlement logic, directly into the token's code.
This allows the derivative to be traded instantly and seamlessly on decentralized exchanges (DEXs). The tokenization process makes complex financial instruments more accessible, transparent, and divisible for investors.
Glossar
Regulatory Challenges
Challenge ⎊ Regulatory Challenges in the crypto space stem from the novel nature of decentralized finance and digital assets conflicting with legacy financial legislation designed for centralized intermediaries.
Tokenization Process
Inclusion ⎊ The process of tokenizing real-world assets or traditional financial instruments dramatically expands market inclusion by fractionalizing ownership into digital units.
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.
Complex Financial Instruments
Construction ⎊ Complex Financial Instruments built on-chain, such as structured products or synthetic assets, leverage the programmability of smart contracts to replicate or create novel payoff profiles not easily accessible in traditional markets.
Tokenized Derivatives
Structure ⎊ Tokenized derivatives represent the fractionalization of derivative contracts into digital tokens, facilitating granular access and enhanced liquidity within cryptocurrency markets.
Smart Contracts
Function ⎊ Smart contracts are self-executing agreements with the terms of the agreement directly written into lines of code, residing on a decentralized ledger.