Instrument and Product Specification
Overview
At its core, Spicenet is designed to reimagine how financial instruments are created and how markets are built upon them. Before diving into the technical details, let's understand the key concepts in the Spicenet ecosystem.
Understanding the Basics
Instruments are the underlying frameworks that define how trading and settlement work. They're the foundational templates that determine the core mechanics of trading. For example, a perpetual futures instrument defines how funding rates work, how liquidations occur, and how prices track the underlying index.
Markets are the actual tradeable pairs that are created using these instrument frameworks. For instance, while "perpetual futures" is an instrument, "BTC-USDC perpetual" is a market built using that instrument. Each market inherits all the properties of its underlying instrument while adding specific parameters like tick size, lot size, and oracle configurations.
Why This Matters
Traditional DeFi has been constrained by rigid instrument frameworks where adding new types of trading mechanics requires extensive protocol changes. Current platforms face several limitations:
Hyperliquid can only support perpetual futures as an instrument
Orca is limited to AMM spot trading as its core instrument
dYdX focuses primarily on perpetual futures instruments
Uniswap specialises in AMM spot instruments
The Spicenet Approach
Spicenet fundamentally changes this by introducing a flexible and permissionless framework for:
Creating new instrument types with unique trading mechanics
Launching markets on top of these instruments with customised parameters
Enabling complex combinations of instruments to create sophisticated trading experiences
Core Instruments
Base Instruments
Spicenet's DAO can create new instruments by choosing between two fundamental types:
Recurring Instruments
These instruments have no expiry and often include recurring events (like funding rate payments). The most common example is the perpetual futures instrument, which includes:
Funding rate mechanisms for price convergence
Dynamic margin systems
Continuous trading capabilities
Cross/isolated margin options
Expiring Instruments
These instruments have defined settlement points. The DAO can configure:
Expiration frequency (daily, weekly, quarterly)
Settlement type (cash or physical)
Rollover mechanics
Final settlement calculations
Market Creation
What makes Spicenet unique is that while instruments are DAO-governed, market creation is permissionless. Here are examples of innovative markets that can be created using these instruments:
Markets Using Recurring Instruments:
BTC/USDC Perpetual: Perpetual Futures on traditional assets
ETH Staking Rate Perpetual: Trade ongoing staking yields
Protocol Revenue Perpetual: Trade protocol fee shares
Liquidity Index Perpetual: Track and trade DEX liquidity depth
Markets Using Expiring Instruments:
Blobspace Futures: Hedging potential gas spikes on L2s by longing ETH Blobspace future contracts.
Quarterly Funding Rate Future: Trade expected funding rates of CEXs.
Decision Market: Market whose aim is to converge on an outcome.
Advanced Market Structures
The real innovation comes from how these markets can be combined:
Cross-Market Strategies
Long ETH staking rate while shorting ETH
Hedging potential gas spikes on L2s by longing blobspace futures.
Arbitraging funding rates across different markets.
Market Making Opportunities
Providing liquidity across related markets
Capturing spread between different expiries
Building structured products from multiple markets
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