What are Long and Short Tokens?
The Decentralized Derivatives Association (DDA) now gives you a way to go “long” or “short” on any cryptocurrency using tokens on the Ethereum network. For those of you who aren’t familiar with those terms, think of being long as a position where, if the price goes up, you make money and being short is a position where if the price goes down you make money. The traditional way of being long an asset would be to simply own it. But, with DDA’s Long and Short tokens you can go long or short an asset without owning it. A big problem currently on the Ethereum network (and any other blockchain network) is that you are limited to just native assets (e.g. ERC20 tokens). If you want to have exposure to Stellar, Tether, or Monero on Ethereum, you’re out of luck unless you go to a centralized exchange and trade in your Ethereum for those coins. In addition, there is no decentralized way to go short these assets unless you use overseas exchanges that don’t legally allow US customers, and which hold (and sometimes lose) your crypto. As a result, many crypto investors live in a “long” only world with no ability to hedge your price risk in these assets.
Lucky for the world, DDA has arrived.

How they work
DDA uses smart contracts on Ethereum to lock collateral (a set amount of ETH that ensures payout occurs at the end of contract) and then issue tokens that represent the long or short sides of a different asset. For example, if you want to make long and short tokens for Dogecoin on Ethereum, you can lock some Ether into a DRCT smart contract and get one set of long tokens that represent Dogecoin (if Doge goes up, the value of these tokens goes up) and then one set of short tokens (if Doge goes down, they gain value).
Contracts start by a “Creator” (any member who chooses to create a contract) making long and short DRCT Tokens for a given rate/duration/start date combination. These tokens are normal ERC20 tokens on the Ethereum network. The Creator is now able to trade these tokens on the network. Owners of the tokens at expiration get distributed the collateral held in the smart contract (similar to bearer bonds). Payout is capped at 100% of the collateral held in the contract.
Sometimes the contracts use multipliers too (e.g. 10x). Since all contracts are fully collateralized, a multiplier indicates what the contracts are capped at, for example, a 10x multiplier means that a 10% move would be a 100% gain or loss.
Trading Possibilities
Let’s say that Vincent owns some crypto. He was early enough in the crypto market that he’s seen some great gains, but not quite enough to cash out for a Lambo yet. A true believer, he thinks Ether is going to have an awesome week with the launch of his new favorite decentralized app. He’s already in Ether, but he wants more.
In this scenario, Vincent can buy one-week long ETH token on a 5X multiplier that expires on the day of the sale. When he does this, a 20% move in the Ether price will double his money!
Another scenario is for more technical traders.
Marcellus is a swing trader. He wrote a top notch program that utilizes cutting edge neural networks to detect even the smallest directional moves in Bitcoin. Up until now, Marcellus has had two options: Hold bitcoin and don’t hold Bitcoin. If the price was going up, he bought. If the price was going to go down, he sold.
The problem here is that the gains are just one directional. With DDA long and short tokens, Marcellus can buy long BTC tokens when the price is going to go up and then buy short BTC tokens when the price is going down. On average, the gains/losses of his strategy are now doubled! This is great news for any trader with a winning strategy.
And finally, what if you just want a breather?
Winston is happy with the value of his Ether bag but is going camping for five days in the mountains. The price of Ether has been crazy lately and he feels he could come back home and the price tanked. Maybe this is right before a major hearing is to take place and nobody knows if the news is going to be bad or good. Winston can take the safety net of hedging using Short tokens and relax on his camping trip, knowing that he’s effectively locked in the price it is currently at.
Current Products
DDA has one-week long and short tokens available on BTC/USD (1X multiplier) and ETH/USD (5X multiplier). Be sure to become a member and you’ll get the chance to vote on future products!
How to get involved
Simply go install MetaMask, put some Ether in it (shame on you if you don’t own Ether by this point), and then head over to the dapp at https://dapp.ddacoop.org .
For more information or if you have questions, don’t hesitate to reach out at: info@ddacoop.org
And of course, join us on Telegram! www.t.me/ddaorg
Written by Nicholas Fett and Mike Zemrose
