DeFi Synthetics on Augur
Posted On May 26, 2020
Augur lets anyone, anywhere create new financial instruments that have never existed – with a few clicks. One can create synthetics that track anything from Apple stock to the price of Ether.
Under the hood, these are scalar markets. Such markets resolve along a scale rather than paying out all or nothing like Yes/No or multiple choice markets.
One compelling use case could be Long/Short DeFi synthetics that track total value locked in DeFi (TVL) or Ethereum Dominance. These can be “levered” such that if you “go long DeFi” and TVL rises 50%, your shares rise 100% in value.
DeFi synthetics would let traders express directional convictions and profit in proportion to how right they are. This may be more attractive to many users than placing all-or-nothing bets.
They may also let market makers operate with lower risk. In scalar markets, shares are less prone to rapidly losing all their value than in other market types.
You could do many interesting things with Long/Short DeFi shares: create Uniswap pairs, compose Sets on TokenSets, or airdrop them as a means to onboarding new users.
Some challenges with Augur synthetics include writing robust market terms to minimize (Invalid) resolution risk and finding short-side liquidity.
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