Introducing: The Octopus Protocol Ecosystem

An open-source protocol to create, exchange, settle, and manage synthetic assets.

Octopus Protocol
4 min readApr 22, 2021
Octopus Protocol Ecosystem

Derivatives: A Modern Financial Instrument

Financial derivatives have established themselves as one of the most powerful concepts of modern finance. Derivatives are essentially financial contracts that represent a function of an underlying asset without actually owning them. Derivatives enable market entities to hedge risks by facilitating buying or selling any asset at a set price in a pre-determined period. This function allowed commodity producers and consumers to hedge risks against price differences in the value of their assets depending upon future production or consumption.

The applications of derivatives laid the foundation for exchange-traded derivatives and Over the Counter (OTC) derivatives — centralized exchanges facilitating contractual agreements for buyers and sellers to exchange risks and govern margin requirements. With the emergence of centralized exchanges and bespoke legal agreements, there emerged another application of financial derivatives — exposure to synthetic assets.

Synthetic Assets

In simple terms, synthetic assets allow accessing the benefits of an asset without actually owning it. It enables exposure of any asset such as gold, stocks, indices, commodities, digital assets without holding these underlying assets. Synthetic assets follow a function such as the price of the specific asset and allow you to reap the benefits of profit gains. This way synthetic assets allow exposure to your preferred asset, through buying or selling, without holding it.

There are several benefits to holding a synthetic asset. One of the use-cases is exposure to assets without dealing with custodial requirements. For instance, leveraging the profit gains of Gold, but without dealing with custody. Another use-case is the facility to trade in a high-value asset without the liquidity factor. For instance, exposure to Bitcoin without the factor of buying Bitcoin trading at levels above $50,000.

Fundamental Issues with Financial Derivatives

Today, the market of financial derivatives is restricted, holds counterparty risks, highly dependent on intermediaries, bound with geographical limitations, and is an overall costly process. The experience of owning and trading derivatives is tedious, encompasses risky factors, and is expensive.

The restrictions and requirements of engaging with derivatives have led to limited access to this financial instrument. Moreover, it has led to unbalanced market dynamics creating an unfair advantage and restricted access to the financial instrument.

Octopus Protocol seeks to create a fair way to engage with synthetic assets and equal opportunities to access derivatives.

Introducing Octopus Protocol

Octopus is an open-source protocol to create, exchange, settle, and manage synthetic assets. Leveraging the technological innovation of blockchain, Octopus encompasses a multitude of products enabling engagement with decentralized derivatives.

It is a DeFi protocol that allows traders exposure to real-world assets by facilitating an environment for the creation and settlement of synthetic assets. We seek to bring value by leveraging the best functions of DeFi and its evolution that offers innovative methods to connect real-world assets to the blockchain. To empower scalability and high-performance, Octopus Protocol uses the interface of the Binance Smart Chain (BSC) network.

The protocol enables developers, individuals, and Decentralized Autonomous Organizations (DAO) to deploy and create synthetic assets on the Binance Smart Chain (BSC).

Value Proposition

Octopus Protocol brings tangible advantages to the derivatives market by encompassing the advantages of tokenization on blockchain, decentralized infrastructure for the creation and management of synthetic assets, and a trustless architecture for exchanging derivatives.

This infrastructure of Octopus Protocol offers a multitude of tangible advantages.

  • Global Accessibility — Global accessibility that is unrestrained by geographical locations and exposure to foreign markets, stocks, and other assets.
  • Fractional — Tokenization of synthetic assets on the blockchain allows market participants to hold or invest in premium assets in fractional amounts.
  • Non-Custodial — Octopus Protocol allows non-custodial access to real-world assets and facilitates new tools for investment.
  • Frictionless Experience — The Protocol offers a seamless way to exchange synthetic assets with limitless possibilities. For instance, exchanging Tesla stock with synthetic Bitcoin.
  • Execution — The Protocol encompasses a decentralized exchange for near-instant execution of orders supported with deep liquidity.

Octopus Protocol Design Features

Octopus Protocol offers a decentralized and trustless architecture to capture the limitless possibilities for engaging in a seamless way with financial derivatives.

  1. Trustless Architecture
    A DeFi protocol powered by smart contracts, its inherent infrastructure eliminates trust barriers for trade and settlement of derivatives.
  2. Limitless Possibilities
    Build tokens that track the price of any asset in real time. Create customizable financial contracts comprising multiple assets.
  3. Affordable Solution
    The protocol facilitates affordable solutions for the creation of synthetic assets by reducing the price barrier for collateral amount. The inherent mechanism is developed such that it increases security and reduces costs with minimal usage of oracles.
  4. Community Driven
    Built and governed by the community of OPS token holders to enable a fairly distributed and decentralized infrastructure.

Octopus Protocol aims to change the market dynamics by giving an equal opportunity for everyone to access financial derivatives that were prior restricted to institutional investors. Let’s jointly reshape the standards by leveraging modern technological solutions and DeFi innovation amassing to changing the market equilibrium.

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Octopus Protocol

Octopus Protocol, a robust DeFi protocol built on the BSC, allows issuance, trade, and management of decentralized derivative assets.