DeFi, Derivatives, and the Age of Oracles: A Q&A w/ Nicholas from Tellor
In a Co.Invent exclusive interview, we sat down with Nicholas Fett, Chief Technical Officer of Tellor (backed by Binance Labs and Maker), who candidly spoke with BountyBase about everything from how the crypto derivatives market has changed over the past 5 years, to the launch of Tellor Core MainNet, to how the USA’s regulatory hurdles helped build derivatives markets in places like Hong Kong.Question: How has the crypto derivatives market developed in the past 5 years?
Answer: Five years ago was before Ethereum and any derivative project of note, so it’s come a long way, to say the least. I’ve been sort of disappointed in the US, (specifically our regulatory regime), in how its played out. At the moment, you have a few different players in crypto derivatives. There’s the regulated US firms (Ledger X, CME, Bakkt), the crazy overseas guys, and then the up and coming DeFi projects.
To summarize US regulations for derivatives, its illegal for US customers unless a company registers with the CFTC. The only problem is that the regulatory hurdle is a gargantuan behemoth that few sane companies would even attempt.
You can see Ledger X’s journey and how they spent years of back and forth and millions of dollars all to get a fully collateralized Bitcoin derivative out the door. If they had given the US the middle finger when they were thinking of starting, they could have moved to Hong Kong and beat Bitmex to market. Bitmex and other wild west platforms have been the big beneficiaries of the US policy, as they offer unregulated products with 100X leverage, and slick easy-to-use platforms to grab users.
Like most things in the crypto space at the moment, the derivatives scene is primarily for gambling, so these products that serve no purpose other than making the house money see huge swaths of demand because there aren’t any regulated options out there th...