DeFi | Will Layer 2 Solutions Be the Catalyst for Derivatives DEX Explosion?

Derivatives are financial instruments whose value is linked to underlying assets. Derivatives can serve as a means to obtain leveraged returns on related assets or simply to hedge positions. Essentially, they provide traders with greater choice, allowing them to adjust the risk of related spot positions, whether increasing leverage or hedging downside risk. These financial products are common in both traditional finance and cryptocurrency asset classes. Derivatives are numerous, from futures contracts, options, collateralized debt obligations, and the popular perpetual swap contracts in cryptocurrency trading.