What Is a ‘Tokenized Option’ and How Does It Relate to a Smart Contract?
A tokenized option is a financial derivative where the rights and obligations of an options contract are represented by a blockchain token. The smart contract acts as the issuer and custodian, encoding the option's parameters (strike, expiration, underlying asset) into the token's metadata and logic.
This allows the option to be traded easily on secondary markets as a standard cryptocurrency token, increasing liquidity and accessibility.
Glossar
Erc-721 Standard
Specification ⎊ Erc-721 Standard is the technical specification on the Ethereum blockchain defining a non-fungible token, mandating unique identification and ownership tracking for each individual token instance within a smart contract.
Token Interface
Interface ⎊ Token Interface is the standardized set of public functions and event logs defined within a smart contract that allows external applications, such as exchanges, wallets, and other contracts, to reliably interact with and query the state of the token asset.
Blockchain
Architecture ⎊ A blockchain represents a distributed, immutable ledger system, fundamentally designed to record transactions across a network of computers.
Options Contract
Mechanism ⎊ An options contract within cryptocurrency markets represents a financial derivative granting the holder the right, but not the obligation, to buy or sell an underlying crypto asset at a predetermined price ⎊ the strike price ⎊ on or before a specified date, the expiration date.
Cryptocurrency
Asset ⎊ Cryptocurrency, within the context of options trading and financial derivatives, represents a digitally native asset class exhibiting characteristics of both fiat currency and commodities, yet fundamentally distinct due to its cryptographic security and decentralized nature.
Secondary Markets
Function ⎊ Secondary Markets are financial venues where previously issued or created financial instruments, including cryptocurrency derivatives and tokenized positions, are bought and sold among investors.