Introduction
Commodity assets occupy a vast market share and are one of the most important tools of the economy around the world. A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas.
For investors, commodities can be an important way to diversify their portfolios beyond traditional assets. Because the prices of commodities tend to move in opposition to crypto and stocks, some investors also rely on commodities during periods of market volatility to hedge their risks.
Usually, commodities trading required significant amounts of time, money, and expertise, and using specialized apps. That is why Tsunami Exchange will be the first place on Waves that gives users the opportunity to trade commodities without requiring additional tools and without leaving the Waves ecosystem!
What is being traded on Tsunami?
As you already know, Tsunami Exchange specializes in futures contracts as the main method of trading. Now we will take a closer look at how it works, using commodities as an example.
One way to invest in commodities is through a futures contract. A futures contract is a legal agreement to buy or sell a particular commodity asset at a predetermined price at a specified time in the future. The buyer of a futures contract is taking on the obligation to buy and receive the underlying commodity when the futures contract expires. Usually, speculative retail investors hope to profit from changes in the price of the futures contract. Thus, they never take actual delivery of the commodity itself. This allows us to design a specific instrument that tracks the price of an underlying asset without the need to hold or supply an actual asset.
Tsunami introduces what’s mainly resemble an Exchange-traded note (ETN). ETNs are a way of participation for investors who are interested in entering the commodities market. ETN allow investors to potentially profit from fluctuations in commodity prices without investing directly in commodities.
ETNs are backed by traders' collateral. The changes in the price of the asset and its dynamics are determined by the counter-positions of the participants. The mechanics of the vAMM smart contract encourages traders to open and hold positions aimed at the maximum convergence of the Tsunami futures price with the commodity index price.
Why is the addition of commodities on Tsunami a unique step in the development of DeFi on Waves?
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Commodities are always liquid, as a large part of the global economy is tied to them;
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Commodities assets are collateral in the real world (oil, gold, gas, etc.);
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Investment in commodity will help diversify the investor's portfolio and hedge trading risks;
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Commodities are independent of the cryptocurrency market and are not subject to sharp periods of volatility;
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Commodities have been added to the Waves ecosystem for trading for the first time.
The first commodity available for trading on Tsunami will be Brent oil, the most popular commodity around the world.
The combination of the above factors shows that the introduction of commodities is a necessary and revolutionary step in the development of both Tsunami Exchange and the Waves ecosystem in general. By adding this type of commodity we expect to attract new users from other blockchains and increase the applicability of Tsunami within the Waves ecosystem.
Increased applicability - more users - more volume - more staking rewards and earnings for investors. It's as simple as that!
Oracle - where do prices come from?
We have figured out what commodities are and why they are so useful, and the main question remains - where do we get the prices to supply them for trading on the Tsunami Exchange?
Tsunami uses Oracle to accurately track the price of the underlying commodity. Price data for Tsunami's Oracle is collected from over 15 data sources every minute. Sources include banks and financial data providers.
One example of our Oracle is the website of our partners Commodities-API. Pricing data is updated every 5 minutes to correctly calculate fundings.
Conclusion
The addition of commodities is a big step on the way to a mass adoption of the Tsunami Exchange. In addition to oil, we soon plan to add other commodities available for futures trading. Share with us what other commodities you would like to see on the Tsunami Exchange!