Swapchain enables users to generate and trade custom futures contracts on the Ethereum network.
Our distributed derivative network allows you to bring your own counterparty to the Swapchain platform or find a counterparty in the open marketplace.
Create and customize your own private market for trusted counterparties.
Why Choose Swapchain?
Swapchain is a protocol that allows traders to create their own custom derivative contracts and deploy them to the Ethereum Network to be executed in a trustless manner.
With Swapchain traders can deploy derivative contracts with custom configurations allowing the flexibility to meet specific hedging and speculation needs.
Swapchain’s distributed derivative network allows traders to find a counterparty or manage their own marketplace.
No Exchange Risk
Contracts are executed off-exchange, meaning traders aren’t subject to slippage, forced liquidations, or mutualized losses due to no fault of their own.
Please read below to learn more about forward contracts on Swapchain and learn about their mechanics and characteristics.
What is a Forward Contract?
A forward contract is flexible, custom futures contract traded off-exchange that allows traders to go long or short on a leveraged basis.
Can you Trade with Leverage?
Yes. Contracts default to 5x leverage on all forward contracts. Custom initial margin is on the way. Read more about Margin under Contract Mechanics to learn more.
How is the Contract Managed?
All contracts created through Swapchain are deployed to the Ethereum Network where all the details are automated via smart contracts, including holding initial margin, executing cash flows, and liquidation events
What is a Proposal?
A proposal is a set of user-created contract specifications, which other traders can choose to execute. A counterparty can pair with the proposal and take the opposite side of the trade to generate a forward contract. All proposals expire and are removed from the pool 24 hours after creation.
What is Margin and How is it Collected?
When two parties enter into a forward contract, 20% of the notional amount (size of the trade/exposure) is collected as initial margin and held in the smart contract for the duration of the trade. When the contract reaches expiration, the margin is released back to each party.
How Are Spot Market Prices Determined?
Swapchain utilized the Cryptocompare Crypto Coin Comparison Aggregated Index Methodology for charting and settlement purposes. "It aggregates transaction data of over 70 exchanges, using 24 hour volume weighted average." Click the link to learn more about the CCCAG Index.
Is There Counterparty Risk?
Yes. While all contracts require initial margin, a trade can settle such that the amount owed from one counterparty to the other exceeds the initial margin collected. While the counterparty can (and should) pay the full amount due at settlement, there is no guarantee beyond what is collected and stored in the smart contract as initial margin. Additional margining tools are on the way to further mitigate counterparty risk.
How Is Settlement Calculated?
Settlements are calculated on a net basis at the end of the contract e.g. on a notional amount of 1 ETH, a gain of 10% will result in receiving 0.1 ETH.
Contract Duration (Expiration)
The contract expiration is the future date at which the contract expires, which is initiated at the exact time the contract is deployed once both parties have matched and met initial margin requirements. Settlement is calculated at expiration.
The notional amount represents the size of the trade or exposure and is greater than the amount of the initial margin deposit.
The price is the forward price used to determine settlement payouts. The price can be specified as a fixed rate or a premium. A premium is a percentage below (long positions) or above (short positions) the spot price at the time of contract creation and tracks the spot price through time. This is generally a tool for market makers who want to provide liquidity without having to constantly readjust contract prices as market conditions change.
The premium represents a floating price equal to a percentage above or below the spot price, such that contracts posted to the order book, when executed (when the proposal is accepted by a counterparty), do so at a price that is automatically adjusted based on the current spot rate at the time of execution. For example, a premium of 1% would execute at a price that is 1% above the current spot rate at the time of execution. A premium of negative 1% would execute at a price that is 1% below the current spot rate at the time of execution.