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Crypto derivatives offer unique advantages over traditional ones. But at what cost? In this article we look at what they are and what kind of security risks the users face.

Comparison of crypto derivatives and traditional onesThe cost and time of launching a crypto derivative exchange and products is drastically reduced, as lots of middle-men are cut out and generally less paperwork is needed. In addition to the fast development speed come huge price fluctuations.

Bitcoin and other cryptocurrencies are known for that to lots of people by now. Professional traders love price fluctuations, as they mean more potential profit.
We look at differences of crypto derivatives and traditional ones, using the example of the popular comparison of Bitcoin and Gold.
 
Demand: A trader can do a study about the demand of the underlying Gold derivative contract asset (Gold itself). The trader can't do that with Bitcoin, as the demand side is less fundamentally driven and currently not well understood.

Supply: A trader also can do research of the Gold supply. Here, only estimates float around and many factors influence it. With Bitcoin, the supply is clearly known.

Marketplace: Gold derivatives can be traded on various regulated exchanges all around the world. The largest Bitcoin future exchanges mostly operate in Asian regions with fewer regulations. Trust may be a big factor, that hinders Bitcoin miners from using derivatives to reduce their operation risk (Gold miners are known to be able to do that).

Availability: Gold derivative markets are usually only available during working hours. Bitcoin derivatives on the other hand are available 24/7.
 
These points show that there are certain benefits of using crypto derivatives. However, the market is still young and needs time to be more mature.

Betting on elections: The TRUMP contract and how it worksThe crypto derivative exchange FTX offers contracts that are basically a bet on the presidential election in 2020. Theoretically, the probability of Trump winning the reelection should be the same as the price of a TRUMP contract. So if the consensus of Trump winning the reelection is 70%, the price of TRUMP should be 0,7$ per contract.

Below you can see the weekly chart of the TRUMP contract. At the right side of the chart, you can see "0.412". This means that the people currently give Trump a 41,2% chance of getting reelected.

Once all major media outlets (The New York Times, 538, 270towin, Fox and CNN) have projected a candidate to be the winner, FTX may settle the contract. If FTX chooses to do so, users wouldn't have to wait for the official votes from the states - source.

It should also be noted: Like in any betting activity, whether it is football games, horse races or presidential elections, there is an inherent risk attached to investing - or betting money on - such activities. Committing to this is fraught with the risk of incurring losses due to factors we will go into detail on later.
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