First Credit Default Swap on Aave Credit Delegation Launched

Andrey Belyakov
Published in
4 min readAug 22, 2020


A CDS is a financial derivative that provides insurance against the default of the borrower

Opium & Aave

The first CDS in DeFi

The first Credit Default Swap built on DeFi is here! In collaboration with our partner Aave, Opium Team has built and launched a Credit Default Swap for Aave’s recent Credit Delegation feature.

This CDS is based on Aave's recent Credit Delegation feature, which was first used by exchange DeversiFi through a 20BTC credit line.

CDS allows to trade Credit Risk of the Aave delegation loan efficiently. It brings the next step of DeFi maturity.

As a provider of such insurance (seller of the CDS) you lock a collateral that is a guarantee for the buyer of CDS. The buyer of the CDS pays an upfront premium to the seller, which is negotiated via the order book. In case of a credit default event, for example, DeversiFi only repaying 30% of the 20BTC loan, then 70% of the CDS seller’s collateral is paid out to the CDS buyer. Buyers of this CDS contract can use it to cover potential losses of the actual loan or use it to speculate on the credit event.

Opium CDS for Aave Credit Delegation

The CDS parameters

The nominal of the contract is 0.1 wBTC, so, for example, to insure the full 20 wBTC loan one needs to buy 200 of these CDS contracts. Traders of this CDS contract can get exposure to this credit risk through buying or selling an amount of these contracts. The margin is set to 0.1 wBTC, and the contract matures on February 5th, 2021 at 08:01AM UTC—which is just after the maturity of the Aave credit line drawn by DeversiFi.

How to trade the CDS contract

Opium Exchange

Use a direct link or select OEX-CDS-AAVE-CREDIT-5FEB-0.1CAP ticker on a SWAPS tab. Place your buy or sell orders to the order book for free and wait for the matching.

Once settled, you will receive a derivative position token that can be transferred, sold on the secondary market, or stored in the cold wallet.

About Credit Default Swaps (CDS)

A CDS is a financial derivative that allows an investor to “swap” or offset his credit risk with another investor. For example, if a lender is worried that a borrower is going to default on a loan, the lender could use a CDS to offset or swap that risk. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse the lender in the case the borrower defaults. In this particular case, the seller of the CDS product takes on the risk of DeversiFi defaulting on their credit. The seller of the CDS is earning an extra return on the collateral by accepting the credit risk of the issuer.

About Aave Credit Delegation

Aave Credit Delegation is a simple transaction where an Aave Protocol depositor delegates a credit line to someone they trust. You can also delegate a credit line to another smart contract that executes predefined functions, removing that trust.

The future of derivatives in DeFi

Financial derivatives are instruments that allow for managing financial risks. Through buying or selling derivative contracts (eg. options, swaps, futures) traders can decrease their risk and limit potential losses or take on extra risk and earn extra returns on their investments.

Today, traders and investors in DeFi & crypto are often exposed to significant risks without being aware of it. In order for this market to mature, DeFi will need more derivatives to allow for risk management and grow exponentially in relation to the growth of the DeFi spot market.

Opium Protocol is designed and built to provide robust financial primitives for decentralized derivatives.

Visit Opium Exchange to speculate on opportunities in DeFi or hedge financial risks. Previous derivatives that were launched include ETH futures, call/put options for gas prices, YFI pre-markets and COMP options.

Opium Protocol allows to build new financial derivatives which are impossible or expensive to create in traditional finance. We are currently supporting four organisations in building their derivatives on top of Opium, such as Olive Futures who are soon launching futures for the Spanish olive oil market.

Opium Network

About Opium

Opium is a universal and robust DeFi protocol that allows for creating, settling, and trading decentralized derivatives. Use our products today to speculate on opportunities inside and outside of DeFi, or hedge yourself against trading risks.

Explore Opium Protocol or try out Opium Exchange.

Stay informed by following Opium.Team on Twitter or join our Telegram community.


About Aave

Headquartered in London, Aave is made out of a team of innovators with the focus on creating a transparent and open financial infrastructure. Aave is an open source and non-custodial protocol enabling the creation of money markets.

Check out Aave website and read up on Aave latest Credit Delegation feature.