Clearmatics, one of the first startups to explore how financial instruments can live on blockchains, reveals a brand new class of decentralized term products, which he calls forecast markets.
These entirely chain instruments take the form of dated term contracts which can follow all data from public chronological series, whether indications of crypto, inflation or temperatures, giving the appearance of something more similar to prediction markets such as polymarket than traditional derivatives.
The forecast markets will be taken care of on the independence of the Blockchain of the layer-1 and the newly developed autonomous protocol (AFP). The beginnings of the new Ethereum compatible channel and the future protocol will coincide with a “forecast” next month, a means of inviting Quants, engineers and challenges of challenge to participate in the creation of prototype products on independence.
“AFP supports the creation without authorization of dated term contracts which can follow all the underlying chronological series, not only the chronological series of the market, but non-commercial chronological series, such as GDP, inflation, global temperature, blockchain metrics, etc.”, said CEO Robert Sams in an interview. “Basically, all the chronological series whose market is held enough to speculate on or the coverage, you can create a product for independence.”
Despite its meaning similar to the prediction markets, currently popular due to the success of Polymarket, the two do not work in the same way. Forecast contracts move one by one with certain underlying factors providing a symmetrical reimbursement profile. The prediction markets offer a single payment.
When an event on the prediction market occurs, the winning team is paid and the market disappears. A sequence of term contracts on a series of underlying data can however continue in perpetuity, said Sams. This allows liquidity to accumulate over time, following the persistent risks, while the prediction markets are more focused on topical accounts, he said.
Forecast markets are not intended to compete with the prediction markets, said Sams.
“We consider forecast and prediction markets as complementary to each other, meeting different needs in a shared and growing space of market -based mechanisms to manage uncertainty.”
The space of crypto derivatives, which has been warmed in recent times when large exchanges have acquired derived companies, remains largely dominated by perpetual term products. Cryms Perps will be taken care of in a future AFP version, said Sams, but in chain, future dated with the ability to follow any measurable and measurable risk factor can create much more value and social utility than protocols focused on cryptographic asset markets, he said.
“There is a community of people in quantitative research and automatic learning research that would like to test whether their systems have an advantage in predicting things that cannot currently be exchanged,” said Sams. “The long tail of value creation will come when people discover how these instruments could be used to reduce the volatility of active wallets. Each portfolio has exposure to risk factors for which there is no corresponding financial coverage instrument. ”
Stanley Yong, head of the Autoity Foundation, the blockchain decentralized governance entity, offers the price of the Singapore law certificate (COE) for cars as an example of real risk that cannot be covered today.
“Singapore controls the number of cars on its roads by rationing the supply of CEE through periodic COE codes,” said Yong. “All cars need a CEO, so the prices of used cars fluctuate with the prices of Coe auctions. A forecast contract that follows the COE auctions would allow a person looking to sell their car to cover the amount they receive in advance. ”
An element of a little more geek market structure of the independent and AFP blockchain is the separation of the exchange part, where buyers and sellers agree on a price and perform a trade, and the compensation part where intelligent contracts maintain guarantees, requirements for margin of management and subfunded auctions. In other DEFI protocols, this is generally done in a vertically integrated architecture where a product can only be exchanged at a specific negotiation place.
AFP allows products to be registered without authorization on several negotiation sites, but with all the guarantees and the chain transmission margin, said Sams. This makes it very effective and also resolves one of the main structural problems with decentralized derivatives, which is the fragmentation of open interest through exchange silos.
“We think it is strange to call a” decentralized “market that when you can only exchange it in a single place of negotiation, even if this monopoly place is a Dex,” said Sams. “We think that a market is only decentralized when participants can enter a position in the place they choose and leave a position in the place they choose.”
