Alpha Venture DAO (previously Alpha Finance Lab), a multi-chain dApp ecosystem with in-house and incubated projects, today announced the latest project launch from Alpha Incubate called Contango, a decentralized exchange that brings expirable futures to DeFi without order books or liquidity pools.
Traders can directly access linear and inverse contracts with expiry dates and leverage. Traders no longer encounter unpredictable funding rates as the final price is paid upfront, providing full cost control.
With the maturity date, the close price can be pre-calculated allowing traders to estimate profits with certainty thus eliminating risks associated with index price manipulation.
The protocol utilizes deep liquidity pools on underlying DeFi protocols rather than having its own liquidity pools to ensure minimal price impact for any trade size. Additionally, every position that is opened is tokenized as an NFT, enabling other projects to easily build on top of Contango.
Learn more about Contango in the official documentation.
“We have been working closely with the Contango team since summer of 2021. The team has demonstrated extensive knowledge in DeFi, particularly an understanding of the futures market from the inside out. This makes us confident that they are well-equipped to succeed and overcome the challenges that they will face from being the first mover to bring expirable futures to DeFi.”
– The Alpha Venture DAO Team
How It Works
Contango allows traders to open positions through atomic lending and borrowing at a fixed rate that occurs on other DeFi protocols. The protocol integrates with Yield and Notional, fixed-rate markets that introduced the concept of fyTokens (fixed-yield tokens, a fungible token similar to a zero-coupon bond, e.g. fyDAI, fyETH) to make everything work.
To begin, traders must post some collateral depending on the desired leverage to open a position.
The protocol will borrow token A on the fixed-rate market, swap for token B on the spot market (e.g. Uniswap), then lend token B back on the fixed-rate market to synthesize a long/short position.
As a result, traders do not have to worry about anything as the protocol automates it all behind the scenes, replicating the cash flow of their futures positions via fixed-rate markets. The user experience will be just like trading on major CeFi exchanges.
Besides the above invention, what distinguishes Contango from other futures exchanges is that it utilizes the collateral posted by traders to give better capital efficiency.
For example, on the long ETH/DAI position where traders post DAI as collateral, less DAI is borrowed from the fixed-rate market to swap for ETH on the spot market (collateral DAI + borrowed DAI). The higher the collateral, the lower the price to open the long position due to less debt.
Learn more about how Contango works by clicking here.
The benefit to ALPHA Stakers
Per the tokenomics of Alpha Venture DAO, stakers of its native ecosystem token ALPHA will be able to claim benefits from the addition of Contango.Exchange to the Alpha Venture DAO ecosystem.
“Alpha Incubate was introduced to ultimately grow the Alpha Universe and bring more value accrual to ALPHA stakers by distributing their tokens to the stakers who support our ecosystem. Along with the Alpha Network, we offer every incubated project with an effective business plan from all dynamic angles, whether it’s the product-market fit, tech advice, or even fund-raising strategies.”
– The Alpha Venture DAO Team