Inspiration

Derivatives are a big deal. Global derivatives are estimated to have a ~$500 trillion market capitalization. Comparing to $0.4T crypto, $38T liquid money and $73T global stock markets. Derivatives, such as options, futures and swaps are useful tools employed by banks, funds and companies to manage risk.

At the same time, derivatives are usually leveraged - meaning that counterparty doesn't usually have funds in their account to necessarily cover all risks. This leads to a complex system of settlement, maintenance margin and margin calls. This system failed in 2008. Margin calls destroyed Lehman Brothers and others. Government had to bailout Wall Street to help unwind staggering amount of defaulted derivative agreements.

What it does

BlockSigma is a set of smart contracts that enable creation and management of derivative contracts for crypto assets. The margin management is done on-chain and doesn't require a centralized actor to ensure that the funds locked inside of the smart contract satisfy the maintenance margin requirements.

How we built it

The core innovation is fully on-chain margin management that requires no central party or oracle price feed. We achieve this by integrating with the Bancor protocol. Bancor protocol is growing adoption and already facilitating millions of dollars of daily trading activity. Bancor uses deterministic price formula that is calculated based on supply and demand of a token. As such, we can get token price at any given moment on-chain, which allows us to calculate the maintenance margin requirement and trigger a margin call.

BlockSigma is also integrated with AlphaPoint trading platform to enable trading of the option contracts created by BlockSigma. In the future BlockSigma's option management user interface can be integrated in the AlphaPoint trading platform allowing trading derivatives just like traditional brokers like Bloomberg or TD Ameritrade.

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