Smart Derivatives: On-Chain Forwards for Digital Assets

Springer Verlag, Lecture Notes in Computer Science, Forthcoming

16 Pages Posted: 29 Sep 2020

See all articles by Alfonso Delgado De Molina Rius

Alfonso Delgado De Molina Rius

Imperial College London - Department of Computing

Eamonn Gashier

University College London - Centre for Blockchain Technologies

Date Written: June 1, 2020

Abstract

In this paper, we present a framework for the development of on-chain forwards (and futures). This utilizes smart contracts to automate the custody of collateral and settlement of payouts on expiry. Importantly, our framework also enables forwards to be traded without counter party risk or reliance on off-chain assets (such as fiat currencies). To achieve this, we build on our previous work on on-chain options and demonstrate how the relevant mathematical guarantees can be extended to forwards. In addition, we discuss recent trends in cryptoasset derivatives, capital requirements, and other design considerations (such as the use of split contracts). This paper will be of interest to academics and practitioners interested in financial smart contracts.

Keywords: block-chain, smart contracts, finance, derivatives, futures, forwards

JEL Classification: G10, G19, G23

Suggested Citation

Delgado De Molina Rius, Alfonso and Gashier, Eamonn, Smart Derivatives: On-Chain Forwards for Digital Assets (June 1, 2020). Springer Verlag, Lecture Notes in Computer Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3672384 or http://dx.doi.org/10.2139/ssrn.3672384

Alfonso Delgado De Molina Rius (Contact Author)

Imperial College London - Department of Computing

180 Queen's Gate
London, SW7 2AZ
United Kingdom

Eamonn Gashier

University College London - Centre for Blockchain Technologies

Gower Street
London, WC1E 6BT
United Kingdom

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