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In the DeFi world, Opium is renowned for the provision of various credit default swap-like products, including those of wBTC and Aave.
Crypto derivatives platform Opium has managed to raise almost $3.25 million in a new funding round. Sam Bankman-Fried’s Alameda Research, Kenetic Capital and QCP Soteria, Hashkey Group, CMS Holdings and Galaxy Digital are some of the investors involved in this new fresh cash injection. Through the funding, The Amsterdam-based startup will enable users to users with Ethereum wallets to access more exotic decentralized derivatives.
During an interview with CoinDesk, Andrey Belyakov, Founder and CEO, revealed that Opium was formed to solve barrier-to-entry, cost-efficiency and transparency problems that exist in the traditional derivatives market. Belyakov added that blockchain allows users to solve the mentioned three problems since it permits each individual to run personal derivatives. However, a person needs some millions of dollars to spare to make derivatives.
Derivatives on Opium
In the DeFi world, the platform is renowned for the provision of various credit default swap-like products, including those of wBTC and Aave. Products that Opium offer to traders aim to insure them in a similar way as Wall Street’s CDSs against other DeFi products.
“As a decentralized derivative exchange for professional traders, Opium can offer any type of derivatives that you can see in the traditional finance world. We believe derivatives are indispensable for the open finance system, and Opium can make the open finance system more comprehensive and more massively adopted,” said Hashkey chairman Xiao Feng.
The protocol was launched more than two years before the decentralized finance (DeFi) popped into the $11 billion market, which has grown extremely fast during 2020.
Protocol Allows Traders to Hedge Against Tether’s Solvency
In September, Opium launched credit default swaps for Tether (USDT) to caution buyers against Tether’s default. Tether (USDT) is currently the fifth-largest cryptocurrency overall as well as the world’s largest and most popular stablecoin since it captures a significant trade volume and large market cap. Today, Tether boosts a trading volume of nearly 47.3 billion and a market valuation of almost $16.7 billion.
The stablecoin has faced various criticisms despite its popularity. Several speculators have, over the past few years, argued out whether real dollars really back Tether (USDT). Most of them couldn’t believe that its market cap grew roughly $10 billion in 2020. Earlier, in the 2019 spring, court documents proved that ‘cash and cash equivalents’ support each and every Tether available.
In an effort to address such criticisms, Opium’s team designed a credit default swap (CDS) on USDT. With the new CDS, users’ investments in USDT are protected as they will be able to bet against this controversial stablecoin.
“You can use it to protect yourself against (or speculate on) a systemic failure of the most widely used stablecoin in crypto. It also allows you to earn interest on your capital in case you are willing to bet on the quality and sustainability of USDT.”
The Opium founder further added that financial products such as derivatives are excellent for centralized stablecoins – also known as “credit notes” – and CDSs comes to insure against such credit default. Tether chief technology officer Paolo Ardoino also admitted that Tether is solvent but needs a lot of hedging.