Crypto Derivatives2019-09-30T16:34:22+00:00

Derivative Contract ONC

A binary deterministic contract linked to an event outcome

Token Address OnChain ONC

On Chain Contract

Decentralization Derivatives Framework

Version 0.1

An On Chain Contract, referenced as ONC for the purposes of explanation, is a type of smart contract that mimics a traditional options contract in a trustless manner.  The ONC tokens aim to facilitate a risk transfer mechanism executed on a decentralized distributed ledger.

Advantages of derivative tokens

Accessibility – Anyone with an internet connection can access and use ONC via a decentralized network like Ethereum.  A user would only need a Ethereum wallet to interact with derivative tokens.  Most customers are unlikely to have access to traditional financial markets where they can purchase more sophisticated insurance specific to their individual needs.  Decentralized options allow anyone with access to the internet to create, sell, and purchase options with any parameters and reference to any underlying instrument for which a price can be accessed.

Trustless – Users of distributed tokens retain their sovereignty through ownership of the underlying asset.  Distributed ledgers eliminates the need for middle services such as brokers or escrow agents as settlement is automated.  This method of derivative settlement eliminates all counterparty risk.  A holder of an option can have full control by possessing the private key to the token wallet.  The private key can be secured by the individual user without a need for a counterparty.

Convenience – For anything with a viable price feed, an On Chain Contract offers protection against unexpected fluctuations in that price, enabling individuals to manage risk in their personal finances and business ventures.

 

ONC is a ERC-721 token collateralized with ERC-20 tokens.

Sources of live data from off-chain feeds communicate on-chain through smart contract technology.  The ONC smart contract timestamps the data to the immutable distributed ledger.  The most reputable data sources (Yahoo Finance, Reuters, Bloomberg) are chosen to offer maximum accuracy of time and price.  The combination of reputation of data sources and a distributed network provides maximum security on a trustless protocol.

Native token ONC

In the information age, information is value.  Through the use of cryptography, live information in the form of a data feed can be quantified.  Distributed Ledger Technology (DLT) allows nodes to point to a verifiable sequential data base.  Any point of data in time can be identified with a unique hash.

Access to data feeds using a native token ONC opens the information using distributed ledger.  ONC is pegged 1 for 1 to the US Dollar (USD) using decentralized oracles to verify accuracy.

By tethering ONC to US dollars at the time of sale we create an immutable record in time and space on the blockchain which matches up to the verifed financial data feed source.  This matching acts as a tally for the ONC smart contract to be posted to a larger blockchain at time of settlment.  Proof of accurate record can be verifed using a block explorer for the given blockchain.

Off-chain event driven data communicates with on-chain distributed ledgers to create secure, verifiable smart contracts that do not require trust in a third party.

On Chain Derivative Contract 

Derivatives are the foundation of financial stability in financial markets.  They are used to transfer risk from one entity to another.  You can think of derivatives as insurance contracts on the variation of a value, expressed as an underlying asset.  The underlying asset can be anything tangible like a company stock, land rights, or a commodity.

The smart contract blockchain Ethereum is used for immutible, distributed, secure value transfer.  The primary drawback of blockchain ecosystems like Ethereum is they have no way to interact with the outside world.  There is not an external mechanism that can directly communicate with the internal code of Ethereum with out some sort of middleware.  Oracle network middleware like ChainLink and Oraclize are needed to communicate tamper-proof accurate data into the code of the smart contract.  Once the data is securely timestamped to the blockchain, smart contracts can execute based on real time events.

The second component that is needed for a functioning derivative market is a stable token that mimics a fiat currency, in our case the United States Dollar (USD).  Several ‘stable coins’ exist on the Ethereum network, though OnChain derivatives is not committed to a particular token, the Maker project stable coin (DAI) is commonly used for a viable stable fiat substitute on the Ethereum network.  OnChain’s native token ONC also acts as stable token marker to assist functionality of the derivative contracts.

A third problem addressed by OnChain derivative market is non-fungibility of tokens.  The smart contracts are constructed in ERC-721 Non-Fungible Tokens (NFT’s) which allow for unique tokens that carry different values.

Example of Non-Fungible Tokens (NFT) parameters in Solidity: 

balanceOf() to count all NFT tokens assigned to an owner

ownerOf() to find the owner of an NFT

safeTransferFrom() to transfer the ownership of an NFT from one address to another address and throws exceptions if the parameters have problems

transferFrom() to transfer ownership of an NFT

approve() to set or reaffirm the approved address for an NFT

setApprovalForAll() to enable or disable approval of a third party (“operator”) to manage all of msg.sender’s assets

getApproved() returns the approved address for this NFT or the zero address if there is none

isApprovedForAll() returns true if the operator is an approved operator for the owner, otherwise returns false

supportsInterface() returns true if the contract implements a valid interfaceID, otherwise returns false

Inputs are contained within the OnChain derivative contract.  The derivative acts as a risk management instrument which is fully transferable on the Ethereum network.  OnChain derivates act as an option market on the blockchain.  These contracts are verifiable using block explorers like Blockchain.com and Etherscan.io.  A digital contract is anything where two or more parties come to an agreement and sign their intent with something that is unique.

Market data feed 

Country Market, or Index Suffix Delay Data Provider
United States of America Chicago Board of Trade (CBOT) .CBT 10 min ICE Data Services
United States of America Chicago Mercantile Exchange (CME) .CME 10 min ICE Data Services
United States of America Dow Jones Indexes N/A Real-time ICE Data Services
United States of America Nasdaq Stock Exchange N/A Real-time ICE Data Services
United States of America ICE Futures US .NYB 30 min ICE Data Services
United States of America New York Commodities Exchange (COMEX) .CMX 30 min ICE Data Services

All live data is timestamped and stored on the distributed ledger denoted by the ERC-721 token ONC.