Since its inception, we have seen cryptocurrency evolve from a low-value decentralized currency bought by a few, to a speculative and volatile investment vehicle that has piqued the world’s interest.

Since 2017, we have seen an uptick in online exchanges offering exchange-rated crypto derivatives. This practice has placed a wrench in the gears of many staunch cryptocurrency purists.

Those advocating against cryptocurrency derivatives had some validity to their claims. After all, cryptocurrency was inherently designed to be a decentralized peer-to-peer currency with a constrained supply, so trading the underlying asset with leverage undoubtedly ruffled some feathers. Pair that with the vastly unregulated market, and you have a recipe well suited for disaster.

That was until AIRISCAPITAL entered the market. By tokenizing crypto derivatives, a layer of trust and security is built. Derivatives tend to grow with rising institutional interests, and as digital securities become more regulated, institutional interest follows, leading to overall stability.

While traditional derivatives markets are speculative with volatility linked to the underlying asset, a few factors make crypto derivatives an attractive choice: supply, control, and risk management.

In terms of supply, cryptocurrency and digital securities are more likely to have a supply cap. The inherent value then is drawn from a deflationary monetary policy, in which the supply of such digital assets is programmatically capped at a finite value. While trading volume can undoubtedly affect the price fluctuations, the hard cap on the supply means that the underlying asset won’t experience a stock split equivalent typical in the traditional securities markets.

The underlying blockchain technology that governs cryptocurrency makes them the digital equivalent to bearer bonds. Before the technologies engineered by AIRISCAPITAL, digital coin bearers had no recourse if the coins were lost. Through tokenization, the underlying asset is digitally assigned to each owner within the blockchain, giving the bearer more control when proving ownership of the digitized asset. Derivatives extend this further as they offer exposure to these assets without the need for direct custody of the asset.

From a risk management perspective, crypto derivatives offer investors the ability to hedge the downside risks of investing in digital assets or allow investors to leverage their stakes without risking too much capital.

Whether you are interested in investing in crypto derivatives or issuing your own, AIRISCAPITAL is there to lead you through each step of the process.