Z2O - Decentralized Perpetual Futures

Dec 22, 2022 • 19 Min Read
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Introduction and Opportunity

In the last issue of DeFi Digest, we dove into decentralized options, a ‘Zero-to-One’ primitive that can onboard the next wave of DeFi users. Perhaps long overdue, this week we dive into decentralized perpetual futures, an instrument native to the digital asset space.

A regular futures contract is simply a contractual legal agreement to buy or sell an asset at a predetermined price at a specified time in the future. Futures contracts are highly standardized and can be purchased via various futures exchanges. In contrast to options, futures contracts buyers and sellers are obligated to deliver underlying assets[1] at the future expiration date. Additionally, futures contracts allow investors to gain different levels of leveraged exposure to the underlying asset.          

Perpetual futures are a type of contract in which there is no specific expiration date. A buyer can hold contracts in perpetuity until they determine the best time to sell. The perpetual future was introduced in 1992 by Robert Shiller to provide derivative markets for illiquid assets. However, the derivative did not gain a lot of populari...

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