As we are preparing for the mainnet launch, we are getting a lot of interest and questions from Antimatter community. What is an option? How are we different from platforms such as dYdX? We decided to write this article to explain Antimatter in plain words to help everyone understand what we are trying to achieve without deep financial knowledge.
Here we go:
Firstly, have you heard or traded the bull and bear tokens on centralized exchanges such as Binance? The idea of the bull and bear token is that its price is pegged to the target asset, and the price will move to a larger extent of the larger asset.
For example, BTCBULL token will increase by 3 USD if BTC increases by 1 USD. The nature of these tokens is that they are leverage embedded and there is no liquidation unless you decide to sell tokens at a loss. But the issue with the bull and bear tokens on centralized exchange is that there is no underlying asset behind them, and the market can be heavily manipulated. This is where Antimatter comes in.
We appreciate the way bull and bear tokens work and we believe it is a good way to reach large audience who are not professional traders but want to get more exposure to price movements. Also, the tokenized leveraged token makes it easier for people to use in the DeFi ecosystem. Such trading derivative experience is revolutionary and completely different from the traditional derivative trading.
Antimatter borrows its advantages and brings it to DeFi environment with robustness. The product of Antimatter will be tokenized leverage token backed by an underlying asset.
If you want to trade derivatives on a centralized exchange, you need to make a lot of decisions from expiration date to a leverage ratio. However, most successful DeFi products put simplicity as priority. Simplicity means a protocol can reach the same goal with minimum decision making and user interference.
In addition, expiration and leverage order book model need computation and storage, and it is not possible to make the system completely onchain. Antimatter solves the complexity by eliminating the time factor (ie, there is no expiration date) and the leverage ratio. When you purchase a call or put token, you will have perpetual right to execute and do not need to worry about time factor. Also, leverage ratio at every price point is pre-determined and it remains same within an option. So what user really needs to do is to just trade call and put tokens.
So what is really happening at the backend? Each option is backed by an underlying asset pool. The asset pool consists of a target asset and stable coin. For example, if it is an ETH-USDT option, the underlying assets are ETH and USDT. When people mint and redeem call and put tokens, they reallocate the underlying assets to the ratio that model determines. The more call option minted, the more Ethereum and vice versa. When you mint a call, you pay your token A, and then Antimatter converts A into ETH and USDT into certain ratio and inserts into the pool. It really is that simple.
None of the existing derivatives platforms is truly permissionless. When you try to create an option on existing platforms, they require you to grab a price oracle because their model cannot work without it. And even if you have an oracle, you need to fill the orders and provide liquidity. It is not what we want in DeFi derivatives. With Antimatter, you only need to define price range and select two tokens, the rest of work is done by math. No oracle or market making. This is what a true permissionless platform should look like.