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Because there's some mechanism for arbitrage that allows you to effectively settle it. If the spot price is too low you can make a profit.
by minitoar 5y ago
Because there's some mechanism for arbitrage that allows you to effectively settle it. If the spot price is too low you can make a profit.
- smabie 5y agoWell that mechanism for arbtrage usually occurs through settlement. ie at contract settlement, you trade one for the other.
- minitoar 5y agoRight, in lieu of that these schemes use a variety of different mechanisms. One way is you can mint the derived asset at a price oracle by staking other tokens. If the synthetic spot price is too high, you can sell your newly minted asset for more than you staked. If it’s too low, you can mint an inverse asset and sell that for more than you staked.