Underlying Derivatives

Context

Seablocks utilizes derivatives positions to stabilize the synthetic USD value of the backing assets under various market conditions. This is achieved through delta-neutral strategies, where short derivatives positions offset the natural long exposure from backing assets.

In the sections below, we outline key derivative concepts and their role in portfolio management:

• Futures vs. Perpetual Contracts

• Inverse vs. Linear Contracts

• Basis Spread

Overview

Seablocks engages in derivatives trading across major centralized exchanges, selecting platforms that offer capital efficiency and robust security measures.

The primary objectives of Seablocks’ derivatives trading include:

• Opening short positions to hedge the exposure from newly minted synthetic assets.

• Closing short positions when users redeem synthetic assets.

• Managing unrealized profit and loss by adjusting positions across exchanges.

• AI algorithmically optimizing portfolio positions to account for risk and improve capital efficiency.

• Adapting to variations in derivative contract specifications across different exchanges to maximize performance.

Not all exchanges provide identical derivative offerings, and Seablocks continuously evaluates the value assigned to backing assets by each platform. The protocol remains agile in adjusting its strategies to optimize execution, risk management and yield.