Clearmatics' New DeFi Derivatives Let Traders Bet on Anything, but It's Not a Prediction Market

Clearmatics, a pioneering startup in the realm of blockchain-based financial instruments, is introducing a groundbreaking new category of decentralized futures products known as forecast markets. These innovative instruments, which are fully on-chain, take the form of dated futures contracts designed to track a wide range of public time series data. This includes crypto indexes, inflation rates, temperatures, and other real-world metrics, setting them apart from traditional derivatives and bearing a closer resemblance to prediction markets like Polymarket.

The forecast markets will be powered by the upcoming layer-1 blockchain Autonity and the newly developed Autonomous Futures Protocol (AFP). To mark the launch of these cutting-edge technologies, Clearmatics is organizing a “Forecastathon” next month. This event aims to engage quant traders, engineers, and DeFi enthusiasts in the creation of prototype products on the Autonity blockchain.

According to CEO Robert Sams, the AFP enables the creation of dated futures contracts that can monitor any underlying time series of interest, whether financial or non-financial. This means that users can speculate on or hedge against a diverse array of factors such as GDP growth, inflation rates, global temperatures, and even blockchain metrics. The flexibility of Autonity allows for the development of innovative products tailored to the specific needs of the market.

While forecast markets may seem similar to prediction markets, they operate differently in terms of payout structure. Forecast contracts move in tandem with an underlying factor, offering a symmetrical payoff profile, whereas prediction markets deliver a one-time payout based on specific events. The perpetual nature of futures contracts on Autonity allows for continuous trading and liquidity accumulation, catering to long-term risk management needs.

Clearmatics emphasizes that forecast and prediction markets are complementary rather than competitive. Both serve distinct purposes within the evolving landscape of market-based mechanisms for managing uncertainty. By introducing on-chain futures contracts capable of tracking real-world risk factors, Clearmatics aims to add value and social utility beyond the realm of crypto assets.

One notable example cited by Autonity Foundation head Stanley Yong is Singapore’s certificate of entitlement (COE) for cars. The fluctuating prices of COEs, which are essential for vehicle ownership in Singapore, present a real-world risk that currently cannot be hedged. A forecast contract tied to COE auctions could provide a hedging mechanism for car owners looking to secure a predetermined selling price.

In addition to its innovative product offerings, Autonity and the AFP introduce a unique market structure that separates the exchange and clearing functions. This decentralized approach allows for permissionless listing of products on multiple trading venues while streamlining collateral management and cross-margining through smart contracts. By eliminating fragmentation and enhancing capital efficiency, Clearmatics aims to establish a truly decentralized derivatives market accessible to a wide range of participants.

In conclusion, Clearmatics’ forecast markets represent a significant step forward in the evolution of decentralized finance. By leveraging the Autonity blockchain and the AFP, users can access a diverse range of futures products tailored to their risk management needs. With a focus on real-world data and innovative market structures, Clearmatics is poised to drive further growth and adoption within the DeFi ecosystem.