Year 4

Cover Image for Year 4
Alexander Angel
Alexander Angel

Three years ago, there were just a few programs that could deliver services akin to ones in traditional markets. Debt and interest rate protocols were slowly coming online, starting a boon for decentralized financial markets leading into the COVID era. Primitive started at the cusp of this boon with a generally good direction: to build decentralized derivative programs.

What started as a simple problem with a simple solution has evolved with the ecosystem, becoming a complex problem with a, still, simple solution. The obvious idea was that as this alternative financial system grows, it will need derivatives like options and futures! In 2020, there were less than five projects working on derivative protocols publicly, so naturally Primitive set out to fill the underserved market of decentralized options.

The straight forward mission evolved into a fundamentally different view of how these markets operate now and will operate into the future. The original approach was to write programmatic conditions that match similar traditional financial contracts and to tokenize individual positions so they can be traded. However, this led to difficult challenges like bootstrapping market liquidity, having a venue that can trade derivatives, and maintaining liveness equality with the underlying chain (e.g. eliminating dependency on oracles).

The unique insight we had three years ago was that packaged derivatives already exist and have heavy usage: liquidity pool shares of Automated Market Makers. For the past two years, Primitive has been developing a protocol that uses this insight to deliver a liquid, efficient, and uncensorable derivatives market to end users.

We are delivering on this vision with Portfolio this year. This is a direction that builds upon the existing markets’ efficiency and liquidity instead of fragmenting it with wrappers; seeing what works and optimizing it for a specific use case is how we turned a generally good direction into a precise strategy that we are excited to watch unfold during Year 4.