Decentralized Derivative Markets: A Conversation With Pods' Rafaella Baraldo

Decentralized Derivative Markets: A Conversation With Pods' Rafaella Baraldo

The following is an interview we recently had with Rafaella Baraldo, CEO and Co-founder of Pods.

What's your background? How did you get involved in crypto/blockchain?

RB: I started my investment banking career in São Paulo, Brazil, in 2014. I worked at Barclays, Itau BBA, and asset management firms. I was lucky to work in various areas such as back office, commercial, and trading desk, which provided me experience in financial markets from multiple perspectives. During my time at the trading desk, I started contemplating whether the bank's trader career was something I wanted to pursue. I realized that I'd find more passion in technology, where it is possible to create better solutions for finance products from scratch. I left the banking world and came across blockchain and Bitcoin in 2017. Diving in immediately, I started a cryptocurrency exchange in Brazil to simplify the user experience of buying and selling crypto. From there, I joined Mainframe to open their office in Brazil. They were starting to explore DeFi at the time, and I completely loved DeFiconcepts and development. During that time, my colleagues and I started working on side projects (ohmydai in Nov 2019 and ohmydefi Feb 2020) that explored solutions using options concepts. In May 2020, Pods officially started.

What value does Pods bring to users? 

RB: Pods aim to be the easiest way for people to hedge their crypto and investments. Options are unique tools that can be used to increase the efficiency of a portfolio. Today, traditional finance's rails and modus operandi make it rather hard for retail users (non-private-banking and non-institutional) to access it. Smart contracts can enable those interactions to benefit the users’ portfolio like never before.

Where do you see Pods five years from now?

 RB: I hope users will be buying straight-hedged assets using Pods products whenever they purchase crypto in a few years. The ultimate goal is to create a world where hedging with Pods will help people sleep better at night as they will feel safer with their portfolio and savings.

What are the most common misconceptions you hear about derivative markets? 

RB: The most common misconception about derivatives is that they caused the 2008 financial crisis. Derivatives are tools that can be used in many forms. Derivatives are a game-changer for people and businesses since they allow for better addressing their needs and setting up an entire industry around it. For example, people worldwide can drink coffee every day at a reasonably non-volatile price because the whole supply chain of coffee used derivatives to hedge their operations. 

I see that "derivatives" are to finance just as crucial as "fire" was to humankind.

The real cause of the 2008 crisis was the fraudulent behavior of the industry participants. Derivatives as a tool were working just fine. Still, the lack of transparency, lack of judgment on extending mortgage credit, misalignment of incentives between parties in the system, and mispriced bonds added to banks' irresponsibility with their proprietary bets led to a major crash.

What’s next for derivative markets in 2021? 

RB: Derivatives can have a significant impact on people and businesses. With DeFi technology, derivatives can be truly borderless and accessible to anyone globally and, therefore, impact the way they invest or do business. This is still an ambitious goal, but we have the means to get there now. We have first to build derivatives that can function healthy and in a decentralized way on-chain. 

And I'd add that those native DeFi derivatives may not work precisely as traditional derivatives, so I'd expect to see many different implementations of derivatives concepts in DeFi native products over this year.