The FinNexus team is working on a new product DeFi derivatives. Namely, decentralized leveraged tokens.
Leveraged tokens are derivatives giving holders leveraged exposure to cryptocurrency markets, without having to worry about actively managing a leveraged position. They were initially introduced by derivatives exchange FTX, and have since been listed on other centralized exchanges.
For example, the ETHBULL/USD, also known as 3X Long Ethereum Token, is an ERC20 token with a return that corresponds to 3 times the daily return of ETH. For every 1% ETH that goes up in a day, ETHBULL rises by 3%.
For a better understanding of the concept of leveraged tokens, please refer to this walkthrough.
→ Managing risk on leveraged positions can be a daunting task. With leveraged tokens, you do not have to worry about collateral, margin, funding rates, or liquidation. You only have to buy the tokens and take leveraged positions. Everything else is taken care of.
→ Leveraged tokens automatically reinvest profits into the underlying asset and add to the designated leveraged positions, assuming a position is profitable. Conversely, they will automatically deleverage if they lose money, likely avoiding liquidation.
→ On-chain leveraged tokens will be borderless and permissionless. Anyone can get access to the leveraged tokens trading freely without KYC requirements.
→ Leveraged tokens have a rebalancing mechanism, adjusting their leverages according to the current exposure. FinNexus codes are open-source and all the mechanisms and transactions are public and on-chain.
→ All leveraged tokens will be fully collateralized with underlying crypto assets. There will be no counterparty risks when redeeming.
→ All leveraged tokens will be ERC20 types, making it simple to store them in wallets or transfer them between addresses.
The FinNexus Protocol for Decentralized Leverage Tokens is expected to be online in the second quarter of 2021. Watch this space for more details.