Introducing Abstract Markets
What if markets could track the quantities that matter to you, beyond the assets already listed on exchanges?
Derpetual is building infrastructure for abstract markets.
What are abstract markets?
Abstract markets let participants trade exposure to the future value of measurable quantities, whether or not those quantities correspond to traditionally tradeable assets.
They can be based on stocks, commodities, crypto, predictions, indices — and combinations of those.
A market equation combines price oracles using simple mathematical operators:
+ - * /The underlying price oracle does not have to represent a traditional asset. It can represent anything quantifiable with a number.
That means there is an enormous number of abstract markets that could be created.
Not every number makes a good market. But there is a finite number of genuinely useful abstract markets that do not exist yet.
The basic properties of abstract markets
Abstract markets are universal.
They work the same way for any price oracle or combination of price oracles.
The design aims to make abstract markets free to launch, with liquidity bootstrapped on a bonding curve.
The design also calls for dynamic market parameters that adjust based on available liquidity and the underlying price oracles.
It is time to redefine what is tradeable.
The blank area between tradeable and untradeable
Why should an exchange decide which markets have the right to exist?
There is a practical reason why traditional perpetual futures exchanges cannot list everything.
They take on risk with every listed asset and have to adjust market parameters accordingly. One mistake can create serious consequences.
At Derpetual, we believe traders should decide what markets should exist.
The design of abstract markets is intended to give anyone the ability to create the markets they want to trade.
The idea became obvious while we were brainstorming new markets during a team retreat in the Polish mountains.
In four days, we came up with around 40 different markets that sounded like reasonable bets.
Then one thing became clear:
We will never make everything tradeable if we have to launch every market ourselves.
That is why market creation matters.
Discovering what matters
Abstract markets can represent almost anything measurable.
They can be used by different people for different purposes.
Our goal is to discover the abstract markets that matter.
A wave of event-driven markets used for speculation will likely emerge.
That is fine.
Derpetual is not opinionated about why somebody wants to trade or create an abstract market.
But the most interesting possibility is the creation of markets that help people manage risks they normally cannot trade.
Consider situations like:
- oil prices rising because of geopolitical conflict, increasing the cost of commuting;
- rent in New York increasing after a regulatory change;
- a flight delay costing someone a day with their family.
The idea behind abstract markets is to make more of those external risks tradeable.
These are possible applications, not a list of available markets or a claim that those risks can currently be hedged on Derpetual.
That is the direction we want to explore.
Abstract markets on Derpetual
Derpetual is building the infrastructure for abstract markets.
The goal is to let traders create and trade markets built from measurable quantities, including combinations of price oracles.
To understand the terminology behind the system, continue with the Abstract Markets Glossary.
To understand the broader thesis behind Derpetual and abstract futures, read The Derpetual Manifesto.