Publish0x Interview: Opium Protocol

This month, we interviewed the team at Opium Protocol, the decentralized derivatives platform that is bringing Credit Default Swaps (CDS) to the crypto market. The $41 million market cap project is currently building two products: a decentralized derivatives exchange aimed at professional traders, called Opium Exchange, and a more newbie-friendly platform called Opium Finance.

Our conversation with the team covers their motivations behind the project, the underlying tech and mechanism, deep dives into features and development progress. But first, let's take a quick look at what Opium Protocol is and what it offers to users.

What is Opium Protocol?

Opium Protocol is a decentralized protocol for creating, trading and settling derivatives.

A developer friendly platform, the Opium team has made it possible to create decentralized derivatives with a few lines of code. Decentralized oracle networks like Chainlink are used for accurate pricing and any ERC-20 token can be used as collateral.

With over $6.6 million in TVL (as of March 16), Opium has quickly risen to become one of the DeFi market's most promising derivatives protocols. The team was kind enough to answer questions on the project, which cover a range of topics.

1. What was your *AHA* moment when you realized DeFi needs something like Opium Network?

We founded Opium Network several years ago before DeFi became a trend. We left our jobs in the financial market to create decentralized derivatives for the traditional financial system. Derivative instruments serve for economic activity and are highly needed in the developed markets to split risks, hedge or even speculate.

2. How big is the derivatives market in TradFi and how’s it going so far in DeFi?

Did you know that the derivatives market is the single largest financial market in the world? The derivatives market is about times larger than the World's GDP. Professional traders are not only ones who use derivatives, but these instruments are an essential component of most financial services that we use every day.

In any effective economic system, the typical ratios between money/debt/derivatives are 1/10/100. In DeFi today, this is not even nearly the case. They will develop for both reasons: DeFi needs more derivatives while becoming mature, and traditional markets need more accessible (decentralized) derivatives.

3. How would you convince someone who hasn’t ever traded derivatives to use Opium Exchange?

We wouldn’t convince general users to use the professional interface of the exchange. Opium Exchange is made for more experienced users and professional traders. We suggest Opium.Finance, which has a straightforward interface and simplified products (such as protection) for general users.

4. Do you plan to implement layer 2 solutions like Optimism to fight high gas fees?

Yes, of course. We see several promising directions and believe that Ethereum should be a global settlement layer rather than a place for each and every transaction.

5. Is there a dashboard users and journalists can look up to see the current data associated with Opium Network?

Right now you can use Defipulse, Defillama, Debank, but we have invited the community to build a dashboard and several useful monitors on top of Opium Protocol.

6. Derivatives protocols are a fast emerging subgroup of DeFi projects. Not to make it a matter of competition, but what does Opium offer over other such protocols?

Opium Network offers architecture that is similar to the traditional financial world. We are not reinventing a wheel and both DeFi and traditional financialists could use it straight out of the box. We believe in a very simple risk management system that uses Ethereum only for the settlement and not for the position’s risk management.

7. Opium Insurance is the next big feature released alongside decentralized derivatives. Can you drop some stats and tell us more about the state of growth of it?

Opium Protection is a user-friendly concept of presenting decentralized analogues of derivatives. We have embedded decentralized derivatives behind protection contracts (for example put options, CDS, CDO). We present those contracts as “protection” because everybody understands it and it is very easy to trade for everyone. This is a fast-growing industry as well as we see a huge need for it in 2021 that can be the year of DeFi de-risking.

8. Would you care to describe Credit Default Swaps for those who might not be aware? Why does a smart contract based CDS matter?

Credit Default Swap is protection (or insurance) against default events. This protection usually is tradeable, so you can always resell it or buy it at any time. The price of such protection depends on a market view of the underlying issuer and could be high if the default is expected to happen and low when the underlying looks healthy.

CDS is a protection that provides a way to hedge and also can be used to take a financial market position, making money when CDS price changes due to risk perception.

9. Developers, developers, developers. Would you say it’s a priority group over regular users, for now,for now to introduce to your solutions?

We are equally focused on users and developers. Users need simple solutions like protection, which is recently getting popular. But we need developers to create exciting products such as decentralized derivatives or even fin-tech solutions on top of the protocol. Opium Protocol allows creating decentralized financial solutions with very few code lines and offers a professional ecosystem for them as "plug and play".

10. 2021 was also a big year for Opium - mainnet launch, a collaboration with Aave. Anything big coming up next that you can share with us?

Yes, we have a lot of good news coming soon. Stay tuned and look closely for our official channels:

Telegram news channel 
Telegram community channel 

The Publish0x team will publish more interviews with up and coming DeFi projects in the weeks to come. Stay tuned for these! 

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Abhimanyu Krishnan
Abhimanyu Krishnan

Technophile, cryptocurrency enthusiast and journalist.

Publish0x Interviews
Publish0x Interviews

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