World’s First Bitcoin Binary Options trading dApp has arrived
The Ethereum based dApp BitSwing functions like a brokerage
The scope of trading instruments available in Cryptocurrencies continues to broaden. The newest edition to this landscape is a decentralized trading app dubbed as BitSwing — world-first fully decentralized binary options trading app on Ethereum Mainnet. Sequoia Capital-backed data management startup, Band Protocol, is behind the endeavor.
Binary options are financial instruments that are based on a yes or no proposition. Just like the 0 & 1 binary digits in computers, they come with one of the two payoff options — where both the gains and losses are capped. There are just two outcomes possible, that’s why they are called binary options. The premise on which binary options trading is based on is whether the underlying asset will be above or below a certain price at a certain time.
The simplicity of a yes or no trade in binary options entices many, especially the new entrants to the market, who don’t understand the complexities of other financial instruments & risk management. Others yet, dislike them for being too speculative in nature. It all depends on your risk profile, available capital & the trading style you are comfortable with.
Smart contracts are coding instructions that self-execute under specified conditions on blockchain networks. The sources from where these smart contracts derive their data from are called ‘oracles.’ BitSwing uses Band Protocol’s Layer-2 decentralized oracle solution to provide real-time data feeds — initial launch will provide price data on two pairs: BTC/USD and ETH/USD. More data feeds will be added in the coming weeks as reported in the official blog.
The real-time price feeds will be sources from CoinGecko, Binance and Upbit, among other sites, who will be rewarded in the form of collateralized “band” tokens for trustworthy information. Each data query currently costs 0.02 ETH so a total of 0.04 ETH will be paid out to data providers in every transaction.
Traders can buy a call option contract betting on an increase in the BTC/USD or purchase a put option expecting the price of the pair to drop, in different time frames. A correct prediction would double your staked tokens in the Ether-denominated options, while you lose all of them if your prediction is incorrect.
Earlier last month, CME announced the launching of its Bitcoin Options in Q1 2020, pending regulatory review. As per the CME, the move was precipitated due to the increased client demand, healthier adoption & robust growth of the Bitcoin futures market. CME is the biggest Bitcoin futures marketplace where 2019 alone has seen an average of 7,000 CME Bitcoin futures contracts (35,000 Bitcoin) traded every day.
With a fizzling out of the earlier bull run in digital assets and a slow start by Bakkt Bitcoin physical future launch, it has been disappointing for Crypto bulls. However, increasing interest by the institutional investors and continued innovation in the Crypto trading arena vouches for the fact that they are not going anywhere.