CDS
This page describes the planned CDS market on MetaFlux.
Planned. There is no wire surface, and nothing to build against. The contract specification is not final. This includes the reference events, the premium schedule, the collateralization, the settlement and the resolution design. This page states intent only. A page of mechanics replaces it when the design ships behind a MIP.
A credit default swap is a contract between a protection buyer and a protection seller. The buyer pays a periodic premium to the seller. The seller compensates the buyer if a defined credit event occurs on a reference entity. The contract is insurance against a credit event.
The plan for MetaFlux is an on-chain protection market that uses the existing primitives of the platform:
- The order book gives price discovery on premiums.
- Agent wallets sign.
- The margin and liquidation stack collateralizes the obligation of the seller.
Resolution
Resolution is the open problem. The design must define a credit event and settle it on-chain. This includes the oracle, the time windows and the dispute process. The deferred MIP-6 prediction-market proposal must solve the same problem. This problem is the reason that on-chain credit products are rare.
See also
- Perpetuals: the leveraged-derivatives market that is available today.
- MIP-6: the shared problem of on-chain resolution.
- Improvement proposals: where a new market type gets its specification.