Alpha Venture DAO (previously Alpha Finance Lab), a multi-channel dApp ecosystem with in-house and incubated projects, today announced the launch of the latest project from Incubate Alpha called Contango, a decentralized exchange that brings expirable futures to DeFi without order books or liquidity pools.
Merchants can directly access linear and inverse contracts with expiration dates and leverage. Merchants no longer face unpredictable funding rates as the final price is paid upfront, allowing full cost control.
With the expiration date, the closing price can be pre-calculated, allowing traders to estimate profits with certainty, eliminating the risks associated with index price manipulation.
The protocol uses deep liquidity pools on the underlying DeFi protocols rather than having its own liquidity pools to ensure minimal price impact for any trade size. Additionally, each open position is tokenized as an NFT, making it easy for other projects to build on Contango.
Read more about Contango in the official Documentation.
“We have been working closely with the Contango team since the summer of 2021. The team has demonstrated deep knowledge of DeFi, especially an understanding of the futures market from the inside. This makes us confident that they are well equipped to succeed and overcome the challenges they will face in being the first 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 the Fixed Rate Yield and Notional markets which introduced the concept of fyTokens (Fixed Yield Tokens, a fungible token similar to a zero coupon bond, e.g. fyDAI, fyETH) to make it all work.
To start, traders need to post collateral based on the desired leverage to open a position.
The protocol will borrow Token A from the fixed rate market, trade for Token B in the spot market (e.g. Uniswap), then lend Token B to the fixed rate market to synthesize a long/short position.
As a result, traders don’t have to worry about a thing, as the protocol automates everything behind the scenes, replicating the cash flow of their futures positions through fixed-rate markets. The user experience will be similar to trading on major CeFi exchanges.
Apart from the above invention, what sets Contango apart from other futures exchanges is that it uses collateral deposited by traders to give better capital efficiency.
For example, on the long ETH/DAI position where traders deposit DAI as collateral, less DAI is borrowed in the fixed rate market to trade for ETH in the spot market (DAI collateral + DAI borrowed). The higher the collateral, the lower the opening price of the long position due to less debt.
Learn more about how Contango works by click here.
The benefit for ALPHA responders
According to Alpha Venture DAO’s tokenomics, stakers of its native ecosystem token ALPHA will be able to claim the benefits of adding Contango.Exchange to the Alpha Venture DAO ecosystem.
“Alpha Incubate was introduced to ultimately expand the Alpha universe and bring more value to ALPHA punters by distributing their tokens to punters who support our ecosystem. With the Alpha Network, we offer each incubated project an effective business plan under all dynamic angles, whether it’s product-market fit, technical advice, or even fundraising strategies.
– The Alpha Venture DAO team