Films like the 1983 movie Trading Places, where Eddie Murphy’s character conducts short-selling and exchange contracts, don’t give an in-depth view of the market. They do, however, pinpoint a realistic trend: markets can be controlled and manipulated to suit a person’s interests.
Traditional markets make it difficult for investors to make it big. They are centralized, and are easily manipulatable by individuals looking to benefit from them. One example is when Gamestop [GME] stocks were halted when Robinhood decided to keep it off its site during the peak of GME’s viral stock hype. Conspiracy?
Still, mainstream traders prefer the safety net of having a governed marketplace with a standard set of rules in place that prevents volatility from greatly affecting the market. A whopping 84% of the population have either not heard of crypto markets (66%), or are not interested in delving into them (18%).
Meanwhile, some traders moved onto digital markets which have a different set of rules. The Decentralized Finance industry, or DeFi, was created in response to the risks of traditional markets. By being decentralized, the market can be free of human errors and governing bodies that can flip the rules as they please. There is also decreased vulnerability to major events like Covid-19, and quick, permanent access to funds due to its blockchain protocols.
However, no system is foolproof, so even DeFi can be vulnerable to some risk factors.
UNCERTAINTY: Cryptocurrencies have long been known for its speculative nature. Risk averse traders stay away from crypto specifically for its volatile tendencies.
LOW LIQUIDITY: Because DeFi markets have yet to hit mainstream, liquidity is low for most cryptocurrencies and are not usable in a majority of retail shops and financial institutions.
CENTRALIZATION: While most projects claim to be decentralized, in reality they are still quite centralized. This is normal to bootstrap initial activity but projects have to show commitment to become more decentralized.
DeFi is continuously improving its systems, as developers all over the world are working on technologies that can further advance its security and mainstream capabilities.
Oction CeDeFi Platform
Oction is a CeDeFi built on the Binance Smart Chain. CeDeFi stands for centralized-DeFi, which may sound contrasting, but is actually a subtype of DeFi that has recently popped up in crypto spaces. CeDeFi has some benefits that DeFi could not provide, such as allowing for the exchange of vetted projects or tokens, and resolving limitations in DeFi for earning multiple yields and tokens simultaneously.
What are Option Contracts?
Option contracts are the backbone of Oction’s platform. These contracts are low-risk, low-cost ways of trading cryptocurrencies by setting a price point for an item, without the obligation of buying it. Today, there are around $9.1 Billion worth of option contracts open globally, but uncertain whether each will be put into effect by their expiration dates.
All option contracts will be transacted via smart contracts. Smart contracts are instant transactions that provide the best benefits for parties involved, while maintaining its security in transferred funds. Buyers (Holders) will have the right to purchase option contracts for the assets listed by the Seller (Writer), then which the Writer can accept the purchase to complete the transaction, and transfers the right to sell the asset to the Holder.
For the types of option contracts, this is where American and European styles differ. An American option contract can be placed in effect anytime within its expiry period, while a European option contract can only take effect at the moment of its expiry period. An American option contract has a higher premium than that of its European counterpart, making it the pricier type between the two. Oction’s platform allows for both to occur, depending on the user’s preference.
NFTs
The option contracts system for crypto assets is especially useful in trading Non-fungible Tokens (NFT). NFTs are one-of-a-kind assets that can be owned solely by one account, and can take many forms of digital assets such as art, music, video, and the like. Popular characters, like the image of Nyan Cat, have already been listed as an NFT as artists are finding these to be a lucrative way of selling their artworks.
Unlike crypto tokens which coins can be interchanged with each other (1 BTC = 1 BTC), NFTs are unique and cannot be equated to any other NFT. There are approximately 550,000 NFT in the market and increasing in this USD90 million industry.
Similarly to the fine arts market, NFTs are sold at an auction basis, and are determined in value by how much the buyer and seller agree on the price. Oction has its own NFT gallery up for sale, featuring artworks, music, and even in-game items with its logo Octopus as the star. NFTs are mixing together art and crypto, and bringing vibrant creativity to technology.
You can check out Oction’s gallery here: https://opensea.io/collection/oction-collectibles
Benefits
DECENTRALIZED: Oction platform is decentralized, removing the risks of disruptions or interventions from governing bodies and organizations. The platform does not present itself as a middle-man, but rather an independent marketplace.
LOW FEES: The platform had taken measures to ensure its fees are lower than those of its competitors not focused on DeFi, or not specifically tailored for option contract trading.
ZERO-TIME DECAY: Through their liquidity pool, transactions are made instant as there is no need to wait to match with a buyer or seller of an item. Matches are automatic,
MAXIMUM EFFICIENCY OF LIQUIDITY: Any liquidity that isn’t utiltized is automatically open for option contracts, so there is virtually no time wasted in liquifying orders. All orders will be integrated into the liquidity pool, ready for trading.
TOKEN BENEFITS: For token holders, special perks are systemized. For writers, they can earn transaction premiums, or priority on liquidity. Holders can have discounts on transaction premiums, while simply being a token holder can earn settlement fees.
Challenges
Oction has Prohibited Jurisdictions in a total of 21 countries, including Thailand and the United States of America, due to restricted laws and regulations. This limits Oction’s reach, and places a challenge for the platform to gain more traction in other unaffected countries.
The KYC (Know Your Customer) process is a set system for identifying persons in efforts to conduct anti-money laundering protocols. Typically, this process goes against the aim of DeFi in creating an anonymous, free market. Additionally, as the token OCTI launches on BSCPad, the platform’s KYC process requires the user to hold a minimum of 1,000 BSCPAD tokens, and reveal their identity to the platform. This sets a challenge for traders to give up their anonymity, an aspect which attracted many traders to DeFi in the first place.
Token
The platform deals with its native token, OCTI, which are governance tokens that give token holders perks within the platform. A token holder may receive discounts on premiums, earn from fees, and get priority within the liquidity pool.
The token launches on 9 April 2021 on BSCPad, a well-known launchpad that releases tokens on DeFi projects like Oction. The token will have an initial market cap of USD547,800, with a total supply of 100,000,000 coins.
Team and Partnerships
The team behind Oction is providing this sort of financial freedom to its users, making Oction a project for the people. Created by the Singapore-based team, the platform was engineered by top developers to ensure security and utility.
Oction has partnered up with several investing firms and institutions that support prospective DeFi projects. Their list of partners include Jigsaw Capital, Huobi Global, Institute of Technical Education, RevoPay, RevoFinTec, and more.
Competitors
OPYN: OPYN is an Ethereum blockchain-based platform for trading assets, and earning premiums for doing so. The platform is a capital-efficient options trading protocol that allows trade crypto assets. Users can buy, sell, and create options, but they must be compatible with the Ethereum blockchain.
HEGIC: Hegic is a trading experience platform to trade non-custodial options, and hedging positions. The platform boasts of complete anonymity, removing the need for registration, KYC, or personal data required.
Conclusion
Oction is definitely giving traders an option as a DeFi platform. Its CeDeFi aspect makes it different from its competitors, in which it combines traditional markets with decentralized finance. However, the KYC protocol and its limitations in regions pose great challenges for the project to perform better than other platforms available.
CeDeFi seems to be the way moving forward as more projects want to appeal to the decentralized crypto folks while maintaining a user experience, and operating structure (i.e. legalities are taken care of). Having a CeDeFi in the options market is definitely a great idea. We look forward to the launch of their token to getting mass adoption for their platform.
