Non-Custodial Crypto Exchange Synthetix to Introduce Derivatives Trading

Non-custodial cryptocurrency exchange Synthetix, built on top of the Ethereum blockchain, is going to introduce new features to its platform, including derivatives trading.

In an official March 10 blog post, Synthetix revealed its plans to introduce binary options trading, as well as futures trading in the third quarter of this year. Binary options are derivatives in which a trader either gets a payout or loses their investment.

Synthetix explained:

“Synthetic binary options will likely generate significant trading volume as they will be able to leverage the liquidity of the debt pool, allowing a trader to take a large position almost immediately without needing to find a counterparty.”

As for futures trading, the exchange noted it would comprise any asset class, including crypto, equities, and commodities. “We expect leverage will initially be capped at 10-20x,” said Synthetix.

The company added that one of the advantages of synthetic futures over perpetual Bitcoin futures would be “a position being liquidated will not require liquidation of the underlying asset,” which removes the need for margin calls.

Traditional assets and other features

Besides derivatives trading, Synthetix is also going to introduce “a huge number of new assets” in the second quarter, some of them being equities and exchange-traded funds (ETFs). “Being able to trade from an ETF to Gold and then into an inverse crypto index product with a few clicks will provide an unparalleled user experience,” the exchange noted.

Synthetix founder and CEO Kain Warwick said: “We are in the process of migrating the price feeds to Chainlink so the addition of any specific asset will be controlled via community consensus, with a request for a new price feed from Chainlink,” adding:

“Once that oracle is available then a SIP (Synthetix improvement proposal) can be raised to integrate it into the protocol. So the community will need to weight up the regulatory risk associated with including each asset before upgrading the protocol.”

Next, in order to attract additional trading volume, Synthetix stated it is preparing to provide leveraged trading in the second quarter. The exchange would first test leveraged tokens using fiat currencies such as the euro and the Austrailan dollar. “We expect to support 5x and 10x BTC tokens both long and short soon after we launch fiat leverage tokens,” said Synthetix, noting that other “large cap crypto tokens” could also be added in the future.

Later this year the exchange also plans to roll out such features as advanced order types, trading incentives, Ether/DAI/BTC collateral and optimistic rollup.

Optimistic rollup is a layer-2 technology which allows to scale Ethereum smart contracts and decentralized apps. Synthetix said that it is “getting closer to a demo” of the feature with the Optimism team. If a decent feedback would be obtained from this demo, the exchange could launch a version of Synthetix which is based completely on optimistic rollup.

Synthetix is backed by Framework Ventures, having collected $3.8 million from the venture company in October 2019.

Third-largest DeFi project

Established in 2017, Synthetix is now the third-largest decentralized finance (DeFi) project in the industry, having almost $94 million in total locked value, according to the data from DeFi Pulse.

In comparison, DeFi major players, MakerDAO and Compound, have roughly $525 million and $128 million in total locked value, respectively.

While the total value locked may hint at the scale of the DeFi recognition, it does not properly indicate DeFi activity. For example, these figures do not include non-custodial exchange volumes.