Hxro Network core contributors are pleased to announce the launch of Zero-Day Futures, a new derivatives contract that simplifies short-term speculation on crypto assets.
Zero-day futures (ZDF) are futures contracts with a 25-hour expiration cycle. Similar to standard expiring or perpetual futures, ZDFs may be traded both long and short during the life of the contract. Any open positions at expiration that are not closed or rolled will simply settle to USDC back to the traders account.
The Current State of On-Chain Speculation
The 24/7/365 nature and inherent volatility of the still nascent crypto markets have made it a prime venue for speculation, especially when hot new tokens can be created by virtually anyone, anywhere. Derivatives have played a key role in this market, allowing traders to easily speculate on the direction of an asset (long or short) using leverage. Historically speculation within the crypto space has been dominated by perpetual futures (“perps”), which allow traders to do so with no fixed maturity and no expiration.
While perps have become a common vehicle for crypto speculation, retail activity has been limited due to them being overly complex.
Additionally, market makers – a critical provider of liquidity in both spot and derivatives markets – have been historically disincentivized from participating in perpetual futures markets on underlying tokens with low liquidity due to a variety of limiting factors.
Illiquid markets can lead to easy price manipulation of any associated derivative and can lead to manipulation of the periodic funding rate as well as lead to forced liquidations. This makes trading perpetuals on assets with lower liquidity profiles often too risky for market makers or liquidity providers to participate in.
Furthermore, market makers and liquidity providers have become somewhat disengaged from these markets for fear of becoming the last “bag holder” of altcoins with fleeting engagement and their associated illiquid derivatives. Due to that illiquidity, market makers have historically been restricted to a limited number of assets, thus limiting their overall participation.
The solution to this is the Zero-Day Future.
Zero-Day Futures Overview
The simple structure of ZDFs provides a hassle-free venue for short-term, intraday speculation, allowing traders to easily trade (both long and short) on crypto assets, whether ZDF’s on top blue chips like $BTC and $ETH or on the latest trending altcoins.
Because of the guaranteed daily USDC settlement, market makers and liquidity providers no longer have to worry about being “hung” in a position that they cannot get out of within a reasonable time period (or not at all).
This will encourage the participation of market makers who were previously reluctant to provide liquidity in illiquid crypto assets for fear of participating in assets that lack liquidity.
ZDF Key Features:
- Simple format for short-term, margin-based speculation
- Daily expiration with guaranteed USDC-settlement
- Settlement to the underlying asset price oracle at expiration*
- No intraday funding payments
- No need to borrow the underlying asset in order to short it
- Can be created by anyone, on any asset provided it has an on-chain oracle to reference as the underlying asset price
* At expiration, the ZDF price always settles to the underlying oracle price based on the chosen settlement calculation (e.g. 1-hour VWAP, 1-hour TWAP, EWMA, last-traded price, etc.).
Zero-Day Futures are powered by Hxro Network’s Dexterity Protocol and SPANDEX Risk Engine. Access protocol documentation here. Join the #HxroNation Discord to connect directly with network core contributors and be the first to receive the latest ecosystem updates here.
Futures trading involves substantial risk. The valuation of futures may fluctuate, and as a result, traders may lose more than their original investment. With respect to these products as well as other products traded on margin, you may have to pay more later. You should not risk any funds that you cannot afford to lose. Losses and liquidation are always a risk. Trade responsibly.