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.
For any additional questions, please visit our knowledge base or contact a support team member via the chat button at support.avax.network.