Ishan Pandey: Hi Rachel, welcome to our series “Behind the Startup.” Please tell us about yourself and the story behind SynFutures?
Rachel Lin: I’m Rachel Lin, co-founder and CEO of SynFutures. I started my career in TradFi at Deutsche Bank in the global markets department, specializing in structured derivatives. Later on, I joined Ant Financial , where I helped build the first version of its blockchain platform. Prior to SynFutures, I was one of the founding partners and head of DeFi and lending for Matrixport, a spin-off of Bitmain and one of Asia’s largest crypto neobanks.
We founded SynFutures based on a few observations:
First, there is already a big demand for derivatives in the financial market. Derivatives transactions accounted for approximately 70% of the total trading volume of traditional foreign exchange (FX) in 2019.
Second, centralized finance (CeFi) derivatives exchanges have a number of limitations, including behind-the-scenes mechanisms that have long been controversial—especially during forced liquidations. Other factors include operational inefficiency that limits the variety of trading pairs and a reliance on the CeFi exchange’s credibility.
At SynFutures, we’re embarking on a new era of accessibility in investing by democratizing the derivatives market and empowering users to trade anything at any time.
The project was able to launch thanks to the strong backing of our top-tier investors. Last year, we announced a $14mn Series A funding round led by Polychain Capital with participation from Framework, Pantera Capital, Bybit, Wintermute, CMS, Kronos, and IOSG Ventures.
Ishan Pandey: How can we short or long NFTs? Further, how does it work as each NFT has a separate market?
Rachel Lin: While NFTs have been skyrocketing in popularity since early 2020, every health financial market must have a way for participants to take both sides of the market, or in this case, short or long NFTs. This enables traders to maximize their profit opportunities while hedging risk and exposure.
SynFutures has a product, NFTures, which enables users to go long or short on individual or baskets of NFTs with a smooth single-token trading experience. This is achieved through NFT fractionalization, which divides an NFT asset into smaller parts so that there can be multiple owners of a single NFT. NFTures bases its contracts on spot price oracles from decentralized exchanges such as Uniswap and SushiSwap, as well as NFT fractionalization protocols such as Unic.ly and Fractional. Similar to traditional futures markets, the spot and futures prices eventually converge on a set periodic schedule.
Ishan Pandey: Can you explain and define the key players in TradFi, BlockFi and DeFi. Also, kindly elaborate a little on the key differences between these three major factors leading to a rise in crypto banking?
Rachel Lin: Traditional finance, or TradFi, refers to the financial systems and operations that we have long known. This includes your local bank, such as Citibank, along with fintech platforms like Paypal. These are centralized companies and organizations.
Blockchain finance, or BlockFi, refers to blockchain-based banks and services. These are centralized and regulated like TradFi systems, but they exist on the blockchain. Common BlockFi services are BlockFi and Coinbase.
Unlike BlockFi, a central organization doesn’t oversee decentralized finance (DeFi) services. As such, users can engage with and use DeFi services anonymously and without fear of censorship. DeFi platforms include Uniswap, Aave, dYdX, and now SynFutures.
The growing interest in BlockFi and DeFi services is rooted in the issues that have long plagued traditional finance, including high fees, cumbersome approval processes, etc.
As institutional interest in DeFi continues to grow, we can expect more TradFi platforms to implement blockchain-based services and for BlockFi and DeFi services to continue to increase in popularity, leading to a rise in crypto banking.
Ishan Pandey: Solana, was one of the best-performing cryptocurrencies in 2021 and has also posed as one of the biggest competitors to Ethereum. What are your thoughts on this?
Rachel Lin: Solana’s growth in 2021 reflects the growing interest in Layer 1 chains, which are often viewed as alternatives to Ethereum because they have lower gas fees and offer more efficiency than Etheruem. However, it’s important to note that Layer 2 scaling solutions for Ethereum also saw growth this past year.
Ultimately, we believe that the blockchain system will consist of many different chains and ecosystems, each of them offering its benefits and use cases. Interoperability between these different ecosystems will be important as we work toward the future of DeFi and Web3.
Ishan Pandey: Can you please share some tips for beginners in crypto trading. Also, what are some of the risks of participating in this activity, especially for novice traders, and how can they be avoided?
Rachel Lin: A common mistake many traders make in the beginning is trading based on hype. Influencers are shilling the “next big” token or project every day, and novice traders often get caught up in the hype and make rash trades. Of course, speculators play an important role in any healthy financial market, and hype does play a role in adoption.
It’s important to research a project before investing. Learn about the utility of the token, how it fits into the project, and what it does. Doing so will allow you to make a more informed decision.
There are always risks associated with crypto investing. If you buy into a token that’s pumping, it may fall in price just as quickly. Trending projects, specifically meme-based projects, can also be risky investments. Again, research is key here, as is hedging your positions. This is where derivatives come into play—you can take long positions and short positions to hedge risk.
Ishan Pandey: Please tell us a little bit about SynFutures and the future of decentralized crypto-based derivatives?
Rachel Lin: SynFutures is a decentralized derivatives protocol that enables trading on anything at any time. Users can create their asset pairs in a permissionless way and take leveraged long or short positions based on anything such as BTC, altcoins, gold, hash rate, and real-world assets.
The future of decentralized crypto-based derivatives is very promising, as we’re already starting to see progress in DeFi and significant interest in derivatives. In traditional finance, derivatives trading is not as easily accessible, so at SynFutures we’re working to make the process as seamless as possible for investors at every level.
Ishan Pandey: What, according to you, will have the greatest impact on the institutional adoption of Bitcoin, and how long do you think the current price rally will last?
Rachel Lin: Regulation will significantly impact Bitcoin and crypto adoption. We can expect adoption to follow as we see more constructive regulation and clarity.
There are varying opinions on the current price rally, but the general consensus is that the next bear market cycle will be different from past ones. With crypto seeing more mainstream adoption and attention from TradFi institutions, we’re in a very different position than we were just a few years. As an asset class, crypto is more resilient than ever.
Ishan Pandey: What role has the pandemic played in allowing traders to profit from cryptocurrency investments? Also, what do you think the post-covid-19 scenario would look like for the blockchain ecosystem?
Rachel Lin: The pandemic has played an important role in boosting crypto adoption because there were many depressed asset classes during this time period. Investors hedge their bets on risker asset classes when interest rates are low, so crypto was an attractive option.
While every financial market has ups and downs, we can expect to see greater adoption for crypto and crypto-related financial services post-pandemic. We’re already seeing fintech platforms like PayPal incorporate Bitcoin into their services, which will further drive adoption.
Ishan Pandey: According to you, what new blockchain trends are we going to see in 2022?
Rachel Lin: Toward the end of 2021, the future of the metaverse and Web3 became more widely discussed to expect progress in these sectors. I also expect to see DeFi become an important part of other emerging sectors, like NFTs, Play-to-Earn, and GameFi (Gaming and DeFi).
As I’ve touched on, regulation will be an essential factor in crypto adoption and direct what sectors see growth throughout the year and beyond.
Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence, asking the right questions, and equipping readers with better opinions to make informed decisions.