Cypher Protocol plans pre-IPO and pre-IDO futures on Solana, listed by DAO vote

Ashton Addison: What is Cypher, and what inspired you to build it?▶ 01:30

Barrett: Cypher is an expiratory, or dated, futures protocol on Solana. Most futures in the Solana ecosystem and in DeFi at large are perpetuals. These markets actually expire and settle, like a more traditional futures product.

Ashton: How does that differ from the futures the Chicago Mercantile Exchange offers on Bitcoin?▶ 01:57

Barrett: The CME has Bitcoin and Ethereum futures, which are traditional products on the layer one tokens themselves. Cypher enables access to a variety of asset classes. We aren't just focused on futures for spot tokens like SOL, ETH and BTC. We're creating rather unique markets, and the community drives their initialization. Initially, the tradable markets will be pre-public ones, so pre-IPO and pre-IDO. That lets retail and institutions gain exposure to late-stage private capital markets, which democratizes access and brings price discovery forward. Currently IPOs and IDOs suffer from a lack of liquidity and open market trading, so when a company lists you see big price gaps, up and sometimes down. A protocol like Cypher can help show what the market is willing to pay for an asset given its public launch. Democratization and open, transparent financial systems are a big ethos in DeFi, and private capital markets are one of the most closed and undemocratized spaces in finance.

Ashton: Who decides which futures get listed? Is there an approval process?▶ 04:52

Barrett: The community, the token holders, the DAO, decide. A person, an institution or a group of people proposes a market they want to trade, whether that's SpaceX or options prior to an IDO or IEO. The token holders then vote yes or no. If the vote passes, the smart contract on Solana programmatically initializes the market. The core contributors don't have the control to say you can't list this market. That's up to the community and token holders. If a market isn't exciting to trade, the community may not keep initializing markets in that sector. That helps prevent a long tail of low-liquidity markets. A price discovery mechanism needs liquidity and volume, so buy-in from the community matters.

Ashton: What can the Cypher token do?▶ 09:22

Barrett: One big use case is on-chain governance: initializing new markets, adjusting how the DAO functions, and allocating resources to partnerships that incentivize protocols to build on top of Cypher. Those could be structured products, other types of markets or aggregators. The more native utility is fee reductions. If you're a trader with a margin account on Cypher and you hold the native token in it, you get a fee tier. The more tokens you hold, the lower the fees you pay. That incentivizes long-term holding and participation in the ecosystem.

Ashton: What happens to a pre-market future once the coin launches and spot trading begins?▶ 07:39

Barrett: When a protocol or organization goes public, these markets will settle. Crypto has no end of trading day, because it's 24/7, so there will be a time frame after an IDO for the markets to converge. At the true expiration date, we use a couple of different oracle systems to pull data into the program for proper financial settlement. Currently there won't be rolling expirations that turn these pre-public markets into public ones. The future is open, though. Because this is a synthetic-style platform, the community could propose rolling 30, 60 or 90 day futures on given tokens. It could also propose other markets, such as rarity tranche NFT futures or pair futures.

Ashton: Where does Cypher fit among the derivatives protocols already on Solana?▶ 12:50

Barrett: There are a number of really awesome derivatives products. Mango Markets has spot and perps, Drift does perpetual futures, and Zeta Markets does expiratory futures on spot tokens. Not many people are doing the dated nature of futures, since most DeFi and crypto futures are perps. Because Cypher is synthetic in style, the protocol can be used to create a myriad of markets. You could design NFT rarity tranche index futures, something on inflation for traditional currencies like the US dollar and the euro, or FX-style pairs for crypto.

Ashton: Why build on Solana, and why on top of Serum?▶ 14:24

Barrett: We believe institutions are coming, and you'll need high throughput and cheap transactions. Solana provides both. We're also built on top of Serum, a decentralized order book in the Solana ecosystem that provides liquidity across a number of protocols. To gain adoption from crypto and non-crypto native people, I think an order book is the appropriate way to go, because it brings price discovery forward. Someone has to place a bid or ask and say what they're willing to pay or sell for. With AMMs, you put in an amount, and the pool's curve specifies what you get back. That's not a great price discovery mechanism, though it's used a lot for trading and swapping in DeFi.

Ashton: Is the protocol live yet?▶ 10:31

Barrett: The protocol is not live. We're going to devnet relatively soon, and we're targeting the end of the month or early February. The team has been heads down for a good amount of time, working hard to get this out to the community. We're really excited to turn the lights on.

Ashton: Who do you expect to use Cypher: crypto traders or bigger institutions?▶ 11:18

Barrett: We look at this as a democratization tool, so we anticipate a good amount of retail excitement about these markets. In the future I believe institutions will start to bring heavier flow into DeFi and crypto at large. The early adopters of the protocol will be more crypto native people, who are already familiar with on-ramping liquidity and interacting with these dapps. We've also designed something very retail-oriented, similar to Robinhood or Public.com, to help onboard new users. In the early days, though, we're focused on retail and crypto native institutions.