What is a derivative?
Rocky Rock avatar
Written by Rocky Rock
Updated over a week ago

A derivative is an investment instrument whose value is derived from the performance of an underlying asset and in which counter-party agreements are hardwired in code.

In decentralized finance (DeFi), smart contracts allow for tokenized derivatives that carry lower counterparty risk than traditional finance derivatives. DeFi derivatives can represent real-world assets such as fiat currencies, bonds, commodities, and cryptocurrencies.

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