Derivatives have proven themselves in the world of securities trading. A similar success story can be repeated in the crypto world as well. Bringing derivatives to the Blockchain can enable investors to better mitigate risks involved in trading cryptocurrencies and allow them to hedge their bets.
DCORP is bringing the power of derivatives to the Blockchain community. The decentralized organization will be owned by token holders and will, in turn, offer a derivatives exchange to the investor community. In addition, the exchange will generate value for the investors, the proceeds of which can be used by DCORP to carry out its venture capitalist activities.
Interestingly, since DCORP itself will be autonomous and democratic in nature (since token holders are the real shareholders and decision makers), a side effect will be the democratization of venture capitalism.
Time derivatives come to the Blockchain
Derivatives trading has the potential to unleash revolutionary change in the way cryptocurrencies are traded today. What DCORP has created is a platform that will allow derivatives trading in the form of smart contracts on the Ethereum Blockchain where the exchange exists.
Users will be provided with a friendly interface and since the exchange is decentralized and operates autonomously there is no need for intermediaries like market makers, bankers or third parties. The opportunity to use hedging mechanisms will attract more investors and enhance the value of the Blockchain, which has been bereft of such instruments to date.
The ability to enter derivatives contracts anonymously will provide additional value to investors and they will also be able to trade existing derivatives contracts by sending Ether to them.
This, of course, opens up new possibilities as Frank Bonnet tells Cointelegraph:
“We anticipate a near future where traditional stocks, indexes and currencies (and other cryptocurrencies such as Bitcoin) are all represented by tokens on the Ethereum Blockchain, backed by the traditional asset hold on a third party account of a law firm for example. These tokens (exposure to the asset) could be traded and could be used as the underlying assets of which the derivative contract derives its value, creating an on-Blockchain economy over time.”
It is pertinent to mention here that derivatives are the missing story when it comes to cryptocurrencies, and now that missing link has been bridged.
Derivatives will bring many benefits in the medium-term, like non-stop trading, instantaneous transactions for a fraction of the current fee, nearly no need for third parties except for traditional assets, no downtime, no DDoS-type attacks, anonymity and the possibility to execute trades without logging in, according to what Bonnet tells us.
Investors get more leeway with derivatives
Investors stand to benefit by harnessing the power of derivatives. Traditional derivatives like futures and options will be available, which will allow investors to hedge and risk manage better.
Investors will also benefit from “futures with ascending stakes,” where they can allow trading parties to raise stakes incrementally as the contract approaches maturity. In order to achieve this incremental increase in stakes, the contract is divided into terms and at the end of each term contracting parties must increase their deposit by the required percentage. In the case of default, the defaulting party may lose their deposit.
This type of futures derivative allows for minimal impact on leverage positions. There is a white paper available for those who want to read more about the type of derivatives that will be made available on the exchange.
Autonomous, decentralized and democratic
DCORP plans to use the Blockchain and smart contract technology and enable talented entrepreneurs and ventures to gain access to funding. It would be possible for anyone to join the organization either as a shareholder or as a talented contributor. Access to the derivatives exchange will remain anonymous and will be made possible through the user’s Ethereum account.
As a collective, shareholders will be the owners of DCORP and an elected board of directors will manage the affairs of the organization. The voting will be stored on a Blockchain and will be open to public inspection. The funding activities of DCORP will not be limited to people with technical backgrounds alone, and non-technical individuals will be able to access the funding opportunities through social media platforms like Facebook or through using a simple web interface which will require no knowledge of either smart contracts, command line tools, bytecode or JSON interfaces.
Early investors in DCORP stand to benefit
It is possible for anyone to participate in DCORP through the crowdsale. The whole process is decentralized and anyone can send Ether to an address to get DRP tokens, which will be given out at a rate of 1 ETH = 550 DRP during the first week of the sale. Investors will receive a diminishing number of DRP tokens in the subsequent weeks.
These tokens are akin to having a shareholder vote in the exchange. The crowdsale, which opened on June 1, 2017, will end on June 29, 2017.
Complete transparency in governance
Even though the DCORP exchange is managed by a board of directors, the organization is promising complete transparency in its operations. The board will comprise of seven elected individuals, who will carry out functions related to governance and will perform the necessary management tasks. The board will not be anonymous and will be voting each time a vote is called.
Management tasks will be performed by board members, while some management tasks that do not require voting can be performed by any board member. Board members will be compensated with Ether and the founder will be a member of the board - his vote will be worth double the weight of a non-founding member. Thus, the voting weight of the DCORP board is nine.
We talked with Frank Bonnet, the founder of DCORP, about the transparency in governance and how it would be enforced. He states:
“The voting behavior of the members of the board of directors is recorded on the Blockchain, public and immutable. Besides that, members of the board of directors can be replaced by submitting a proposal and getting the token holders to vote in favor of it.”
It is possible for anyone to submit a governance and funding proposal in the decentralized organization. Funding proposals, however, compulsorily require shareholder approval. In order to eliminate spam, submitting a proposal will require a payment in Ether.
At the moment, a governance proposal (board of directors) would require 0.1 ETH, governance proposal (shareholders) would require 5 ETH and a funding proposal would require 1 ETH.
The pricing of proposals, however, is also democratically controlled, as Bonnet reveals:
“The amount of ETH required to submit a proposal is managed by the token holders as well. Anyone can submit a proposal to change the fee.”
An interesting play of factors
The streamlined democratization of venture capitalism that DCORP intends to carry out is interesting. It involves creating a token that will allow the voice of shareholders to be heard within the organization they will create and also allow shareholders to receive dividends or fund future projects.
The fact that even non-technical persons can benefit from this is truly novel. The plan to add the dynamic of derivatives can also bring an element of risk management to venture capitalism that could generate further investor interest.
Given these factors, it would not be wrong to say that DCORP, the ICO and the exchange are all worthy of investor interest and attention.
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.
Let's block ads! (Why?)
Powered by WPeMatico