A NFT based perpetual futures!

I found recently about a new project that issues a NFT position of your perpetual futures position. It tracks the underlying asset’s performance but do exist as “token” at the same time.

One could argue that this is not a real token, but all values of the crypto space are binary based on 0 and 1 and track an “underlyer”, which does not exist or not.

  1. There is no broker anymore. Trading is done between users who provide liquidity (thereby earning rewards from the network) and traders.The risk is fairly shared between traders and liquidity providers.

  2. There is no interest, only a funding fee, which ensures that the balance between liquidity pools and contract volumes remains the same (thus the contract volume is completely secured with real crypto assets unlike the traditional financel world where the contract volume exceeds the liquidity).

  3. There is no high leverage to create a NFT position. Goal of the protocol is to have a risk manage tool. So gambling “levels” are strictly limited by the project itself.

  4. Tokens positions are backed by real assets (liquidity pool).

  5. the NFT position can be transfered, moved, even sold as position (like you sell BTC’s other any other tokens)

  6. Since it’s perpetual, there is no expiry date.

In summary, it is a totally new type of derivatives, probably the first in existence , however, I do not trade, as I still think it makes more sense to wait and see what the scholars say before using it as risk management tool.

What do you mean by risk management tool, you may ask? Well to give you an example. If the market is overall bearish, you can maintain your positions, without selling them, while having a option to reduce the downside risk by opening a small tokenized (shorting) against BTC for e.g.

However, I hold tokens of the project that have nothing to do with the actual derivative trade. They act as governance tokens, with which the project can be controlled and influenced. There is also a buy back which is funded by transaction fees from traders. All interest free.

when does risk management end and gambling begin in this case?