Hello, everyone! My name is Leo and I’m an ex-FX swap and interest rate derivatives trader.
I am applying for a $50k grant to build a decentralised exchange for cToken futures. The grant will go towards set up costs and attorney fees.
A cToken future is new kind of interest rate derivative that is a cash settled non-deliverable forward that also creates a fixed versus floating exposure to the Compound Supply Rate of any given market.
The first set of problems that this product will solve is enabling fixed rate deposits and stable rate borrowing using the existing Compound liquidity pools. The stable rate borrowing in this context is different from AAVE’s stable rate borrowing, because there is no risk of the rate being reset. However, if the utilisation ratio on average realises at a region that implies a wider spread between the supply rate and borrow rate, the borrower would be under-hedged.
The second problem that this product will solve is by creating a hedge instrument for crypto interest rates. As the market develops, my hypothesis is that overall level of crypto interest rates will become move correlated across protocols and CeFi lenders. With that assumption, an interest rate derivative that references the Compound Supply rate will move around with the general level of crypto interest rates, and therefore serve as a hedge instrument.
Our team have built a proof of concept demonstrating one of the use cases (fixed rate deposits). It is only deployed on a local blockchain so I’m happy to host a demo and discuss what we’ve built so far. We are currently a team of 4 people (all met online) and have signed up for the HackMoney hackathon and plan on building a minimum viable product over the next 3 weeks. Concurrently I would like to push forward with making this idea a reality.