Since its 2009 inception, the web3 space has served as a hotbed for innovative, decentralized monetary networks and financial protocols. From sovereign money to decentralized exchanges (DEXs) and peer-to-peer lending platforms, web3’s highly disruptive technologies have attracted the attention and capital of high-profile investors, top technologists, and national leaders alike.
Today in 2023, with Bitcoin and decentralized finance (DeFi) well established, a pair of brave web3 trailblazers, Kinetix and Kava, have emerged from web3’s ambitious community of innovators to deliver the industry’s next groundbreaking product. The pair are disrupting the $1 quadrillion derivatives market and its foremost financial vehicle, the futures contract.
The History of Futures: Crop Production
Futures contracts were originally developed in the 19th century in order to minimize risks for crop producers and the wholesalers who purchased their crops. Due to fluctuations in weather patterns and other climate conditions, seasonal harvests were subject to substantial fluctuation, and thus so too were crop prices. In order to prevent particularly harsh seasons from bankrupting producers or wholesalers, the two parties began exploring economic agreements called futures contracts.
A futures contract composes a legal agreement whereby a seller delivers a specified amount of standardized goods to a buyer on a designated date at a fixed price. With the help of futures contracts, farmers received a guaranteed price upfront that ensured a sustainable income level. Likewise, wholesalers were able to secure an ample supply of product at a fixed price. At large, futures contracts enabled both buying and selling parties to mitigate unhealthy price volatility, and to ensure stability in an uncertain market.
While futures contracts continue to support farmers and wholesalers into the 21st century, the landscape of futures trading has evolved dramatically.
The Evolution of Futures: Financial Products
In the age of the internet, futures have become an investment class of their own, as most buyers have no intention of accepting the delivery of the assets they trade in. While futures contracts continue to play a major role in crop markets, they also serve a robust function acting as hedges for investors and funds that seek exposure to a wide array of assets without having to buy them directly.
On this accord, futures contracts have also expanded to encompass various stock indexes. Indexes allow investors to purchase an entire basket of assets in a single financial instrument, thereby contributing to simplified, secure, and balanced portfolio management strategies for investors and funds across the globe.
The Future of Futures: Landing in Web3
In web3’s digital native landscape of decentralized infrastructure and smart contracts, futures contracts are ripe for a makeover. That’s what Kava, a leading app-chain in the Cosmos ecosystem, and Kinetix, the chain’s premier DeFi hub, have taken on as their cardinal mission.
Kinetix has already launched its debut platform that features a brand new type of derivative instrument inspired by the original futures contract. Called perpetual contracts – “perps” for short – Kinetix’s digital native contracts do away with the outdated, unnecessary characteristics of 19th century futures contracts and leverage smart contracts to produce a revamped, on-chain alternative tailored to the web3 community.
Unlike futures contracts, perpetual contracts never expire, can be held indefinitely, and are always settled in cash. In addition, perpetual contracts allow traders to take on leverage and increase their exposure to price movements by borrowing capital sourced from a distributed body of liquidity providers.
Thus, with Kinetix’s perpetual contracts, investors are not only able to gain access to a wide array of blue-chip crypto assets including USDT, COSMOS, KAVA, BTC, and ETH, but they can also increase their exposure up to 50x, determine personalized holding periods, and open and close positions on demand. Best of all, traders can rest assured that any and all leverage they take on comes from a decentralized body of their peers – not from a small group of invisible plutocrats.
Kinetix and Kava: Trailblazers Leading the Charge
Already, web3’s rapidly growing market for perpetual contracts is regularly generating $100 million in daily volume, and the sector shows no signs of slowing down. As early-stage pioneers, Kinetix and Kava have their heads down working to build out new features that give users more and more of what they want: ultra-fast transactions, lower fees, major leverage, and more assets. As Kinetix continues to work closely with Kava to deploy new platforms in its DeFi hub, web3 traders across the world only continue to benefit from the pair’s synergy and exciting innovations in crypto derivatives.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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