Decentralised Forward Contracts
Bilateral derivatives,
without the middleman.
Create forward contracts on any underlying asset — collateralised with cryptocurrencies or tokens — and settle peer-to-peer on the network of your choice.
Forward contracts on any observable underlying
ProDerivatives enables two parties to enter into a bilateral forward contract on any underlying asset provided an observable price exists that can be expressed in the value of the chosen collateral.
Collateral is held in non-custodial smart contracts deployed on blockchains. No bank, exchange, or clearinghouse stands between you and your counterparty.
From collateral to settlement, step by step
Deploy collateral contracts
Each party independently deploys a collateral account smart contract on the blockchain network of their choice.
Transfer collateral
Each party transfers cryptocurrency or token into their own collateral account. Ownership of the collateral never leaves the depositing party until settlement or close-out.
Create and describe the forward
One party creates the forward contract through their collateral account and specifies two things: how to obtain the price of the underlying, and how to convert that price into the unit of the collateral.
Counterparty reviews and accepts
The other party examines the contract terms — the forward price, the pricing function, and the collateral requirements — and takes the opposite side.
ProDerivatives prices the contract
Using the pricing function provided, ProDerivatives periodiacally calculates the mark-to-market value of the position and publishes it to the chain.
Collateral is locked, not transferred
Based on the current contract value, a portion of each party's collateral is locked or released within their own contract. Locked collateral cannot be withdrawn but remains in the original owner's account. Nothing is transferred to the counterparty during the normal life of the contract.
Physical delivery and mutual cancellation
When the underlying is delivered and the agreed price is exchanged, both parties submit a cancellation instruction. The contract closes, all collateral is unlocked, and neither party owes the other anything further on this contract.
Built-in protections across the contract lifecycle
Expiration without cancellation
If the contract reaches its expiration date without a mutual cancellation, the mark-to-market loss is transferred to the exposed party from to the other. This compensates for any unfavourable difference between the contracted price and the prevailing spot price.
Margin calls and top-ups
If a party's collateral falls below the required threshold during the contract's life, they are given an opportunity to deposit additional collateral. The contract remains open while the top-up window is active.
Forced close-out
If a margin call goes unmet, the collateral held by the defaulting party is transferred to the exposed counterparty and the contract is closed. The transferred amount will normally slightly exceed the contract's value, giving the exposed party time to find a replacement counterparty without incurring a loss.
