Alpha Venture DAO (previously Alpha Finance Lab), a multi-chain dApp ecosystem with in-house and incubated projects, today announced the latest project launch from Alpha Incubate called Contango, a decentralized exchange that brings expirable futures to DeFi without order books or liquidity pools.
Traders can directly access linear and inverse contracts with expiry dates and leverage. Traders no longer experience unpredictable funding rates as the final price is paid upfront, providing full cost control.
With the maturity date, the close price can be pre-calculated allowing traders to estimate profits with certainty thus eliminating risks associated with index price manipulation.
The protocol utilizes deep liquidity pools on underlying DeFi protocols rather than having its own liquidity pools to ensure minimal price impact for any trade size. Not only that, every position that is opened will be tokenized as an NFT, enabling other projects to easily build on top of Contango.
Learn more about Contango in the official documentation.
“We have been working closely with the Contango team since summer of 2021. The team has demonstrated extensive knowledge in DeFi, particularly an understanding of the futures market from the inside out. This makes us confident that they are well-equipped to succeed and overcome the challenges that they will face from being the first mover to bring expirable futures to DeFi.”
– The Alpha Venture DAO Team
How It Works
Contango allows traders to open positions through atomic lending and borrowing at a fixed rate that occurs on other DeFi protocols. The protocol integrates with Yield and Notional, fixed-rate markets that introduced the concept of fyTokens (fixed-yield tokens, a fungible token similar to a zero-coupon bond, e.g. fyDAI, fyETH,..) to make everything work.
To begin, traders must post some collateral depending on the desired leverage to open a position.
The protocol will borrow token A on the fixed-rate market, swap for token B on the spot market (e.g., Uniswap), then lend token B back on the fixed-rate market to synthesize a long/short position.
As a result, traders don’t have to worry about anything as the protocol automates it all under the hood, replicating the cash flow of their futures positions via fixed-rate markets. The user experience will be just like trading on major CeFi exchanges.
Besides the above invention, what distinguishes Contango from other futures exchanges is that it utilizes…
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