Decentralized Derivative Markets: A Conversation With Opium Network’s Andrey Belyakov
What's your background? How did you get involved in crypto/blockchain?
AB: For half of my professional life, I used to be a mathematician and worked with probability theory, focusing on large and decentralized systems. Then I applied mathematics in traditional finance. I made a great career and managed billions of USD in large funds and a hedge fund. One of my best investments, however, happened outside of my full-time work. I invested in Ethereum on its ICO and stayed in love with it and its community.
What value does Opium Network bring to users?
AB: As a protocol, Opium brings a decentralized analogue of professional derivatives for the DeFi ecosystem. The mature financial system needs derivatives as they are essentials for risk transferring and capital efficiency. For the ecosystem, it is an obvious value because Opium brings derivatives for other projects, helping them become more sustainable and efficient. For the regular DeFi user we also just launched "Opium.Finance" that is probably the most straightforward user experience for derivatives in the whole DeFi! We repacked sophisticated products in the simple form of insurance and risk trances. Think of insurance against solvency of a stable coin, smart contract risk or price depreciation - it is all possible with two clicks now.
Where do you see Opium Network five years from now?
AB: I want it to be "the protocol for derivatives", like Ethereum is the blockchain for smart contracts. We built protocol's architecture in the same way as traditional financial markets to be used by banks, brokers, and Wall Street guys. We started to build Opium three years ago before DeFi was a term. Our only goal was to build an ecosystem where people can create better products, such as exotic derivatives or truly permissionless financial contracts.
What are the most common misconceptions you hear about derivative markets?
AB: Derivative markets are sophisticated, and you need to study years and years to understand their mechanics. Most of the misconceptions are around the role of derivatives in the financial crises; many think hedge funds and derivatives contribute to the crisis. It is another way around, derivatives make the financial system more efficient 99+% of the time, and in case of the crisis, they can make things worse for somebody who is not careful enough. I would compare those instruments with the sharp knife, that can be a massive help to a good cook, but it is also possible to cut your finger if you don't know what you are doing.
What’s next for derivative markets in 2021?
AB: The markets are developing gradually, but we would see two types of demand. First is the need for hedging; hot projects and their interconnections need to be de-risk to mature. Now to be in DeFi, you should accept all risks or nothing, but this has already started to change. Second, we will see a lot of speculative demand for risk, that can be very quickly satisfied with derivative instruments. Opium is a non-custodial protocol that connects those two groups and splits the risk at the market; risk-takers are connected with risk hedgers on the long/short sides of tokenized positions. Isn't it cool?