The idea of yield futures is not new. Indeed, products like ‘interest rate swaps’ and rate trading have existed for some time within hyperfinacialised capitals like Wall Street and London. In fact, many larger institutional players rely on these tools to hedge positions on larger trades and require such flexibility and control over expected yield to conduct their business.
As DeFi has been gaining incredible ground in the last 12 months, many institutional players are looking to come into the market; however, they’ve found themselves struggling to manage risk because balancing the incredible returns possible in this sector with the real need for the stability that their clients in the traditional finance world demand isn’t easy.
As the above graphic shows, some features are ubiquitous among DeFi applications. Among them are community governance models and some that are common to specific chains such as the increased speed and reduced cost associated with DeFi applications based on Polygon.
When one begins to look at the possibility of yield futures, one has a limited number of options. In this article, we will be focusing on Alchemix. Alchemix is a platform that allows users to unlock their liquidity, similar to Unreal; however, it has some specific limitations. Alchemix approaches the problem of locked liquidity slightly differently, allowing its users to get an ‘Advance’ on their yield in the form of a ‘self repaying loan’. This self repaying loan is then repaid by the yield their staked tokens generate. In this model, staked tokens must remain locked until the advance is repaid. While such ‘instant yield’ is also available on Unreal, the two products differ with the control Unreal gives over that yield, by creating a form of yield marketplace, where traders can speculate on yield fluctuations.
Another limitation of the Alchemix protocol is that it is limited to the Ethereum chain, this is a real issue as there is a growing percentage of DeFi transactions occurring on L2 solutions such as Polygon as well as other more cost effective chains like Cosmos where the fees are more palatable for retail traders. In order to truly provide value to both retail & institutions, we believe that any successful Yield Futures protocol will need to be adaptable in a multi chain world. This will allow the flexibility of utilizing more cost effective chains for smaller DeFi transactions while offering the unparalleled security of the Ethereum mainnet for the larger transactions.
“We tried to build a product that was truly unique, strong enough to cater to the most demanding institutional clients, yet user friendly enough for those retail investors who are just starting their DeFi journey. Unreal gives its users unprecedented access to a powerful array of tools to maximize yield.” -Ishan Garg Founder & CEO
Though many solutions aim to solve the problem of locked liquidity, only Unreal provides the unprecedented mix of retail-friendly execution alongside the complexity that institutional clients demand. As these larger institutional players begin to enter DeFi ‘en Masse’, revolutionary protocols like Unreal will pave the way.