With the increase in retail investors trading derivatives and investors moving to decentralized exchanges (DEX) due to regulations in the US and China, there has been an increase in the number of users using DEX derivatives, and Bitcoin (BTC) whales are turning to derivatives and buying interests in derivative contracts.
This led to an increase in the daily trading volume for derivative protocols, so that they can briefly take over key financial platforms such as Coinbase, which aroused interest from retail investors regarding the transition to derivatives trading in decentralized finance (DeFi). But without the right exposure to derivatives in DeFi, new investors are likely to stop trading derivatives as quickly as they started.
But is this the case in the current DeFi sector?
Derivatives on DME: is it worth the risk?
DeFi derivatives provide value, but leave the shortcomings of conventional finance. However, the cryptocurrency market is volatile, not to mention the difficulty of trading derivatives on DEX, as retail investors must learn to manage themselves. These investors need guidance and knowledge in both DeFi and platform navigation when they first enter into derivatives.
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If you use DeFi apps in 2020, you will probably feel that the user experience is outdated compared to its central exchange counterparts. Now, in order to attract new waves of users, especially those who used to use centralized exchanges, protocols must now focus on simplicity and convenience. By guiding new users to the protocols, users get a place to understand the software, which encourages them to stay. Otherwise, the mud left by users who have had bad experiences with derivatives may lead future traders to avoid trading DeFi derivatives altogether.
From the user’s point of view, derivatives can simply be a tool for achieving a specific goal, whether it is to gain influence or to secure an existing position. As developers of the derivatives protocol, we can provide a clear explanation of the user interface as well as the risks associated with derivatives trading. For example, we can provide tooltips to explain complex features on the application page to new users, arrange two-week introductory talks to give instructions to new users on how to use the platform, and answer any questions they may have. . Owner. In addition, having a test network where users can trade on paper can serve as a way for them to become familiar with the platform and experience trading before committing real money to the protocol. The DeFi protocol should not be an obstacle to trading in derivatives if users are well aware of the risk and have a good education.
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DeFi changes derivatives trading
Most new investors are not experts in DeFi derivatives, so the protocols actually put more effort into welcoming these new investors in such a way that they are ill-equipped to handle derivatives. There is now more educational content about derivatives trading, whether it is on Twitter, YouTube, Medium or Discord. As such, it is much easier to learn more about derivatives trading in DEX now than it is in DeFi in the summer of 2020.
In addition, DeFi protocols replicate traditional finance, leading to growth. For example, there are financial technology apps like Robinhood that simplify options trading by defining a strategy a user might want to use and allow users to implement this strategy with a single click. Similar strategies have been implemented in the DeFi area. In fact, there are more and more protocols offering regulated derivative products, such as Ribbon Finance and Stake DAO, which allow beginners to seamlessly enjoy the benefits of using derivatives.
Greater adoption experience by creating more experiences
Protocols focus on different ways to improve the usability of their protocols. A major obstacle is to prevent the mass adoption of cryptocurrencies: their uselessness. By improving user-friendliness and offering a simplified and clear interface, users become more adaptable, so that they can quickly become familiar with derivatives trading.
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Today, most derivative protocols are very easy to use.