Derivative Landscape in Terra

Before we discuss the derivative landscapes in Terra, what does “derivative” mean?

A derivative is a contract between two or more parties in which the value is determined by an agreed-upon underlying financial asset or collection of assets. Bonds, commodities, currencies, interest rates, market indexes, and stocks are common underlying instruments.

A crypto derivative is essentially a contract between the buyer and a seller for the potential value of a digital asset. The parties to this transaction do not possess the underlying asset, nor do they exchange it as typical trading suggests, but instead gamble on its cost, at which they agree to purchase or sell the item.

What is derivative trading?

A derivative is a contract or service whose price is calculated by the value of the underlying asset. Derivative assets include currencies, currency exchange, commodities, stocks, and interest rates. The contracting parties of such agreements have made diametrically opposing forecasts for future trading prices. To make a profit, both parties bet on the future value of the underlying assets.

What is derivative trading in crypto?

Any cryptocurrency token can be used as the underlying value in crypto derivatives trading. Two parties that sign into a business arrangement speculate on the price of a cryptocurrency at a future date. The parties agree on a selling or buying price for the cryptocurrencies on a specified day, independent of market pricing, during the initial phase of the contract. As a consequence, by acquiring the currency at a lower price and selling it at a higher one, investors may profit from changes in the underlying asset’s price.

Now that we have learned the meaning of derivative, let us dive down into Terra’s Derivative Landscape.

Levana

Levana is a decentralized exchange technology that allows for leveraged holdings in any asset. Levana allows permission-free, censorship-resistant capital markets. Terra Blockchain was used in its development.

Users can deposit LUNA to acquire Levana Tokens (LVN) and mint LUNA2x.

Vertex Protocol

The Vertex Protocol. Markets for cryptocurrency FX. Vertex allows you to trade perpetual swaps and leveraged spot directly on-chain. Vertex, which is permissionless and capital-efficient, brings the power of DeFi to users everywhere. Vertex intends to provide the infrastructure and processes required to bring real-world money markets and actual financial goods onto the blockchain.

PRISM

PRISM is a ground-breaking derivatives protocol that integrates new asset classes into DeFi, letting users to control the risks associated with unpredictable prices and variable returns in a simple and capital-efficient manner. PRISM does this by dividing digital assets into two different components: a yield component and a main component.

Investors in digital assets currently have insufficient means to generate funds or access liquidity with their holdings. Many people opt to use these assets as collateral in order to borrow against their value. Because of the customary volatility of the crypto market and the overcollateralization required for these secured loans, stories of large liquidations frequently appear in newsfeeds.

Sigma Protocol

Sigma Protocols are a fundamental building block for zero-knowledge proofs, zero-knowledge proofs of knowledge, and other applications. A sigma protocol is a three-round proof that begins with a communication from the prover to the verifier. The verifier will provide a random challenge. The prover has sent a second message.

What is Terra?

Terra is an open-source blockchain payment network for algorithmic stablecoins, or cryptocurrencies that monitor the value of currencies or other assets. Terra stablecoins may be spent, saved, traded, or exchanged instantaneously on the Terra blockchain.