MARKET Protocol - Open source building blocks powering decentralized derivative trading and exchanges

  • MARKET provides developers with a trustless and secure framework to create
    decentralized exchanges, including the necessary clearing and collateral pool
    infrastructure. As a protocol, MARKET enables third parties to build applications for trading,
    order routing and related activities.

    The decentralized protocol facilitates risk transference and a trustless trading system
    through smart contracts on the Ethereum blockchain. MARKET contracts derive their price
    from an underlying asset, either digital or real-world. Traders are not limited to owned or
    existing ERC20 tokens, allowing price exposure to other cryptocurrencies like Bitcoin,
    Ripple, and Monero.

    As derivatives, MARKET contracts offer users continuous price exposure and future
    settlement. Traders can quickly enter long or short positions in any contract where they find
    Trade participants then contribute funds to a collateral pool before trade execution. The
    contract then distributes funds in a rule-based manner at an agreed-upon settlement date
    or when Traders exit positions before the settlement date.

    The clearing functionality provides a safe and secure framework to manage crypto assets,
    positions, and leverage in a systemically responsible way. All smart contracts and collateral
    pool balances are publicly available on the blockchain. No person or entity controls the flow
    of assets among participants, order matching, contract creation or dispute resolution.
    Participants will govern the protocol in a democratic and equitable fashion. Traders of the
    protocol will be the owners and decision makers. The goal of MARKET is to provide users
    the most efficient, safe, and secure environment possible while creating a robust and fair



    MARKET allows third parties to create “markets” by hosting an order book. The order book
    hosts, referred to hereafter as “nodes”, are incentivized to host order books by collecting
    transaction fees, which they set and control. MARKET simplifies the complexity of securing
    collateral, validating creditworthiness, executing settlement and the custody of customer
    funds with smart contracts.
    At this time, nodes are not responsible for the matching of trades and never have custody of
    funds. Traders of the protocol can post orders as makers, or they can trade against resting
    orders as takers. Nodes act in a bulletin board like fashion and broadcast all maker orders
    transmitted to them providing potential matches to takers, who ultimately select and
    execute the trade
    In the future, MARKET may pursue alternative node solutions, such as a fully decentralized
    order book and matching, as well as other scaling implementations.

    Contract Creation and Clearing

    MARKET allows users to create a contract, specify its terms, publish those terms, and
    provide a mechanism for automated settlement while ensuring contract solvency through
    collateral pools. Any Trader can create a new contract by outlining the contract
    specifications. The contract creator will be presented with the following options:
    ● Underlying Instrument: What is the underlying asset for pricing? This could be a real
    world or digital asset.
    ● Price Floor and Cap: This defines the maximum loss or gain for participants and the
    amount of collateral each participant must post in order to take a short or long
    ● Expiration Date
    ● Settlement mechanism: Creators select an oracle-based solution for the final
    settlement price of the contract used in profit and loss calculations
    ● Base Token: What will the base currency be for pricing? This dictates the ERC20
    token contributed to the collateral pool
    Since the value of the contract is derived from the value of a held cryptocurrency, contracts
    can be created for any physical asset, digital asset, or ERC20 token.

    Shared Collateral Pool

    Each MARKET contract is comprised of multiple smart contracts that create the shared
    collateral pool and needed accounting of an individual Traders’ balances denoted in the
    defined base token (any ERC20 ).

    Traders will deposit collateral in the form of ERC20-compatible tokens to the smart contract
    prior to trading, and all profits and losses from trades will be settled using the tokens.

    After depositing tokens, the Trader can submit orders and enter positions based on their
    smart contract balance. When a Trader opens a position, tokens will be transferred from the
    Trader’s balance to the collateral pool. The tokens in the collateral pool fully fund the max
    loss of all open positions within a specific contract. If a Trader closes a position prior to
    settlement, their previously allocated capital - plus or minus any profit or loss - is available
    for withdrawal or further trading. Alternatively, a Trader can hold their position through
    expiration. In that case, a oracle will provide a settlement value which is used to determine
    the Trader’s profit or loss. Once the contract enters a settled state, users may call a function
    to return their collateral.

    All open positions are fully collateralized at the time of execution removing counterparty risk
    and replacing one of the core functionalities of traditional exchanges . A smart contract
    governing the collateral pool will provide a reliable and trustless solution to traditional
    custody of funds issues.

    The executed trade price and quantity determine the amount of collateral moved from the
    Trader’s balance to the collateral pool. Allocated collateral equals the maximum loss
    possible for that position. For buyers, it is the entry price minus the contract minimum, and
    for sellers, it’s the contract maximum minus the entry price.

    This collateral remains in the pool until the trade is closed. Next, the contract updates the
    price and quantity of the user’s open positions.

    Leverage and Contract Range

    MARKET contracts offer continuous profit and loss exposure derived from an underlying
    asset up to a PRICE_CAP and PRICE_FLOOR specified during contract creation defining the
    contract range. Leverage offered through the MARKET protocol differs from traditional
    leverage, which runs the risk of forced liquidations and unfunded positions.

    Traders will commit the difference between the executed price and their maximum loss to
    the collateral pool when they initiate a new trade. This action will require less equity than
    the total notional value of the position providing implicit leverage. All prices between initial
    entry within the contract range are tradeable. The outcomes are not binary.

    If the high or low of the range is breached the contracts is settled with the participants on
    one side awarded their maximum gain, while the other side receives nothing (their
    maximum loss). It is possible neither is breached, in that case the contract trades and
    expires conventionally. We plan to implement this functionality to ensure that the market
    remains solvent. This process is one of the most important features of the contract framework
    and the MARKET protocol. The amount of leverage afforded to an open position depends on
    where the price of the trade executed relative to the ranges of the current contract. For
    example, users will post less margin when selling near the maximum as they have less

    Traders can replicate uncapped payoff structures by stripping together a series of
    contracts. We expect third-party implementations of MARKET to provide multiple strikes
    per contract and an easy, cost-effective way for Traders to create the exposure they want.
    This may present Traders with arbitrage opportunities as Traders can spread-trade multiple
    contracts against each other.

    Two detailed examples of trading the MARKET protocol are including later in the document.

    Short Selling

    Currently, there are limited and inefficient options to short crypto assets. However, a
    MARKET contract makes shorting simple.
    If two parties are willing to transact at a predefined price they can trade. There is no need
    for the short to locate or borrow the underlying asset. With MARKET, if a contract is listed
    and has liquidity, it can be shorted.

    Order Submission and Execution

    To begin trading, a user will first commit the requisite amount of the base token to the
    collateral pool smart contract, thus ensuring funds are available to trade. Funding the smart

    contract prior to execution results in fewer transactional failures during matching and
    creates a better user experience.
    For a Trader to enter a trade, they will submit an order, as a maker, to a node providing both
    a price and quantity. Upon receipt, the node confirms that the maker’s address has the
    necessary balance in the smart contract to place the order. Next, the node will post and
    maintain the order in the order book until another Trader (taker) fills it. For providing this
    service, the node sets and collects a transaction fee. The taker is responsible for filling the
    maker order by calling the trade function via a smart contract and supplying their address.
    The taker controls order matching, reinforcing the trustless role of the node. At that point,
    funds are moved from the Trader’s smart contract balance to the collateral pool. The node
    never handles funds. Finally, the new positions for each participant are recorded in the
    smart contract and on the blockchain.

    If multiple executions exist, positions are exited in a LIFO (Last In, First Out) manner. After
    exiting a position, the appropriate amount of collateral (including any gain or loss) will be
    allocated back to the user’s smart contract balance and become available for trading or

    Expiration and settlement

    Upon the expiration of a contract, functionality built into MARKET allows contracts to be
    settled using an oracle such as or Thomson Reuters Block1IQ. Oracles provide
    external data to the blockchain. The contract creator will have the ability to set the
    frequency for oracle queries.

    To avoid incorrect or inaccurate settlement prices, we will implement a time delay between
    the initial execution (contract expiration) and the time at which users may withdraw their
    funds. If more than a certain percentage of the participants with open positions initiate a
    settlement dispute, then the contract enters a disputed state.
    In the event of a settlement dispute, a backup oracle or group of backup oracles can be
    used to obtain a settlement value. As crowd based consensus mechanisms evolve MARKET
    intends to implement additional resolution mechanisms. Until that point, disputed
    settlements may also get resolved through a more centralized process to ensure funds are
    equitably returned to participants and not permanently trapped in the contract.


    In order to get the most out of MARKET for the non-technical user, distributed apps or
    “dApps” will be built by MARKET for use on the MARKET Protocol in addition to third party
    developers. MARKET plans to create simple user interfaces that intuitively explain the
    process of selecting contract variables and deploying MARKET contracts to the blockchain.
    Additionally, a contract explorer will provide the ability to search previously deployed
    MARKET contracts and their specifications. Users will also be able to test their oracle
    queries to ensure they function as expected prior to contract deployment.


    MKT will be the base token of the MARKET ecosystem and benefits from integration into all
    facets of MARKET. Peer-to-peer trading is free on MARKET and no fees are native to the
    protocol. Nodes providing order book hosting and management will have the option to set
    and collect transaction fees for offering this service. Orders submitted without the required
    transaction fee may be rejected by the node. These transaction fees will be collected by the
    nodes in MKT.
    MKT holders will also have a vote in protocol improvements and development. This ensures
    both users and projects using MARKET Protocol have a voice in the protocol’s future.
    Token Use
    1. Contract Access: Initially, participants are required to post 25 MKT tokens along with
    the appropriate base token (for collateral) to trade each user-defined contract. MKT
    posted in this way is returned to the user when they stop trading a specific contract
    or upon expiration.
    2. Transaction fees: Nodes provide a service to users of MARKET Protocol and in
    exchange for this service, may charge a transaction fee denominated in MKT. Each
    node sets its own fee for the service.. Nodes are expected to differentiate
    themselves on the fees and services provided giving users many choices for
    3. Settlement: For accuracy and autonomy, most contracts will automatically settle to
    publicly accessible oracle solutions. In the event of a settlement disagreement, or a
    disrupted settlement process, MARKET intends to a employ number of solutions
    including, backup oracles or a crowd sourced resolution pulled from the pool of
    MKT holders.
    4. Contract Creation: Initially, users will be required to hold a minimum of 500 MKT to
    create a new trading contract. The purpose of this arbitrary holding is to encourage
    thoughtful contract creation.
    5. Protocol Decisions: We expect MKT token holders to vote on protocol decisions and
    development. This will include things like number of MKT tokens required for
    contract access or creation as indicated above. The more MKT an account holds; the
    more influence it will have. At the onset, decision making will be more centralized.
    MKT holders represent the whole ecosystem, traders, nodes and speculators and
    each has a voice in protocol direction. Over time, our goal is to move towards a more
    community-based decision model.


    The MARKET Protocol team comes from diverse technical and financial backgrounds with
    over 30 years of cumulative electronic trading experience on global exchanges.
    Co-founders Seth Rubin, Phil Elsasser, and Collins Brown have been working together since
    2014 managing a 24-hour algorithmic trading group and started trading cryptocurrencies
    the next year. These experiences enabled the team to see how blockchain could solve
    many of the problems inherent to traditional and crypto exchange models. These insights
    catalyzed the development of MARKET Protocol, to create an open, trustless, and
    decentralized trading marketplace.




    white paper:






    Example A – Single Stock Contract

    In this example, we showcase how the MARKET protocol can be used to create a derivative
    contract between ETH and a traditional security, Tesla stock (NASDAQ, TSLA)

    User A will define:

    1. A base currency (any ERC20 token, in this case ERC20 compliant ETH)
    2. An underlying asset (in this case TSLA)
    3. Settlement (with oracle)
    4. CAP and FLOOR- If the price of TSLA/ETH is currently 10, the contract may be
    created with a CAP of 15 and FLOOR or 5. If the contract underlying instrument goes
    to 5 or 15 it expires. All prices are tradeable between 5 and 15.
    At expiration all users are paid out their gain or loss.


    1. The Trader identifies a contract spec they want to trade. In this case it is TSLA/ETH
    2. Trader A deposits 10 ETH and Trader B 7 ETH to the smart contract to begin trading.
    They also deposit 25 MKT each.
    3. Users with balances can withdraw their balance at any time. Funds committed to
    open positions are not eligible for withdrawal.
    4. Contracts have a shared collateral pool used to hold funds for open orders and

    Placing an Order
    1. Trader A creates an order object to buy 1 TSLA/ETH at price 10, signs it and
    transmits the order to the node.
    2. The defined TSLA/ETH contract has a CAP of 15 and a FLOOR of 5.

    3. Node confirms that Trader A has funds available in smart contract to create this order.

    4. Node accepts order, and displays a bid for 1 TSLA/ETH at price 10.
    Trade Execution
    1. User B looks at the orders held by the node sees user A’s order for 1 bid at price 10.
    User B wants to sell 1 ETH/Tesla at price 10
    2. User B then takes User A’s order calling the fill trade function to the MARKET smart
    contract with the order information
    3. The MARKET smart contract then fills the order and allocates positions.
    4. Collateral balances and user balances are updated. Each user has their max loss
    added to the collateral pool
    5. Transaction fees designated for the nodes (in MKT tokens) are sent at execution.


    Using an TSLA/ETH contract with a CAP of 15 and FLOOR of 5 there are three post trade
    scenarios. If either 15 or 5 is traded in the underlying TSLA/ETH pair, then the contract
    expires and goes to settlement
    1. Traders exit position prior to expiration
    2. Traders hold position to expiration
    Contract price CAP or FLOOR is breached
    Scenario 1: Users exit positions prior to expiration
    Both Traders have an open position, A is long 1 at 10 and B is short 1 at 10. The TSLA/ETH
    relationship which was trading at 10 is now trading at 13.
    Trader B wants to realize a loss and creates a new order in the same process indicated
    previously and submits the order to a node. As a closing order, there is no need for
    additional collateral.
    Trader A wants to realize a profit and fills User B’s order.
    Both traders are flat. Trader A has made 3 ETH and Trader B has lost 3 ETH.
    Initial collateral balances were 5 ETH each. Trader A receives back 8 ETH and Trader B 2
    ETH. Total balance of pool was 10 ETH and is now 0. If they are done trading this contract,
    both receive back their MKT tokens.

    Scenario 2: Traders hold trade till expiration - 1 month from contract creation
    Both users have an open position, A is long 1 at 10 and B is short 1 at 10.
    The contract organically settles. An oracle delivers the necessary settlement price based on
    the contract specification which is is used to determine the Traders’ PNL.
    In this case, the contract settles at 7.

    User A has lost 3 ETH and receives back 2 ETH (initial deposit + PNL) and User B made 3
    ETH and receives back 8 ETH (initial deposit + PNL).

    Scenario 3: Contract Hits CAP of 15

    Both traders have an open position, A is long 1 at 10 and B is short 1 at 10.
    In this case, the contract hits the upper bound trading 15 When this happens the contract
    automatically expires at a price of 15.
    Trader A made 5 ETH and receives back 10 ETH (initial deposit +/- PNL) and Trader B lost 5
    ETH and receives back 0 ETH (initial deposit +/- PNL).

    All open positions are recorded on the blockchain and transparent to all users. The balance of
    the collateral pool is always fully funded to cover all open positions. As a user trades out of
    open positions, the accounting is done in a last in first out method.

    Example B – Hedging a Utility Token

    Users can hedge utility tokens with MARKET removing price movement both up and down.
    The majority of existing and future ICO tokens provide the owner some benefit or utility.
    These tokens, however, may have considerable price volatility which could actually
    outweigh any potential benefit associated with the token. MARKET provides owners of
    utility tokens a way to hedge their price exposure while maintaining the utility associated
    with owning the tokens. Token owners never sell or transfer their tokens.

    In this example, we will use SALT lending tokens. SALT is a peer to peer lending platform
    allowing users to borrow fiat through loans backed by crypto holdings. SALT Lending
    tokens are necessary to participate on the platform and obtain loans.

    Since they were issued, SALT tokens have traded from the low $2s to a high of over $17.
    With MARKET Traders can hedge this price volatility.

    To illustrate this example, suppose Trader A owns a number of SALT tokens and wants to
    hedge their price exposure:

    1. Trader A owns 10 SALT tokens worth 5 ETH and wants to hedge them, he would
    need to sell 10 contracts

    2. Trader B doesn't own SALT tokens but wants to speculate on the price of SALT
    It is important to note, that Trader A still has his SALT tokens and can use them to access
    the platform. Trader B never had SALT tokens and still doesn’t.

    For Trader A to hedge his SALT token price exposure, he would need to sell 10 contracts.
    The current price is 0.5 ETH. This means they have a maximum downside of 0.25 ETH * 10 =
    2.5 ETH
    Trader B is willing to buy SALT/ETH at the same price. From here SALT tokens can go up or

    Post Trade

    We will cover two post trade scenarios:
    1. SALT goes down.
    2. SALT goes up.
    Scenario 1: SALT goes down from 0.5 to 0.375 and Traders exit positions.


    How to Avoid Cryptocurrency Theft

    Cryptocurrencies are the newest form of money. They are the Internet of Money— A financial revolution! However, problems exist. Security and custody of funds are still a major issue.

    The growing number of cryptocurrency thefts and hacks

    The rising value of cryptocurrencies has attracted investors, speculators and thieves alike. Many people have lost their coins to attacks with stolen valuations totaling billions of dollars. But by far, the highest number of thefts have happened on exchanges — around 80%. In 2014, approximately 650,000 bitcoin (now worth over $7 billion) was stolen from Japanese exchange, Mt.Gox, the largest recorded theft to date. More recently, another Japanese exchange, Coincheck, lost $500 million worth of NEM coins to hackers as well.

    Yet wallets and exchanges are not the only targets of hackers. Other crypto-related businesses requiring the storage of large amounts of coins have become targets for theft too. One recent example is Slovenian-based mining company,NiceHash, which was hacked for 4700 BTC in December 2017.

    Below is an infographic of recorded thefts and hacks of cryptocurrencies from 2011 to March 2018:

    list of recorded thefts and hacking of cryptocurrencies:


    Centralization comes with customer service support, convenient UI/UX, greater volumes, and instant off-chain trade executions. But all of those benefits come at a huge cost in favor of issues related to centralized custody of funds, disclosing personal information, and jurisdictional restrictions.

    Cryptocurrency wallets

    Not only have thefts taken place on hot wallets, but recently cold storage wallets have been a target as well. For example, Nano Ledger S recently discovered a vulnerability. There is also the issue of hacks that happen as a consequence ofpurchasing hardware wallets from third-party services like eBay.

    The awareness of decentralized custody of funds and its importance amongst cryptocurrency traders and investors is one of the main focuses in the industry. One widely used decentralized wallet solution is Electrum. It was released under the MIT license in 2011 and is used for securing bitcoin payments. It is a free, open source software with support for all major hardware wallets and two-factor authentication. Electrum proves that decentralized software can offer a good user-experience and be reliable, however the security issues associated with using it are still ongoing. To compound the issue, Bitcoin is just one of over 1,500 different digital assets. Securing all of them in a decentralized manner is very difficult.

    Many Ethereum network participants useParity wallet to secure their funds. Unfortunately, it suffered a hack in July. It also had a critical vulnerability that resulted in locked funds for 584 wallets in November 2017. Their total balance is unknown, but outside sources have quoted that the funds were worth around 300 million dollars at the time.

    Decentralized exchanges

    Many market participants are short-term traders. They are not usually holding all of their funds in cold storage. Luckily, we are witnessing the emergence of many decentralized exchanges (DEXs) in the space like IDEXCrypto Bridge or Bisq. At the time of this writing, none of the top 10 most used decentralized exchanges have been hacked. But they do have other downsides.

    The two main issues affecting DEXs are extremely low volumes and lack of cross-chain trading relationships. In many cases, these exchanges only support the trading of ERC20 tokens. Atomic swaps could help solve this issue, but only exchanges for Litecoin/Decred and Bitcoin/Litecoin currently exist. Otherwise, there has been limited progress in the development of ERC20 token swap exchanges.

    Novel ways of addressing the issue of custody

    Smart Contract technology has empowered gifted developers with an opportunity to build products that could have the benefits of centralized solutions while enabling trustless custody of funds, trade execution, and settlement with no single point of failure.

    With MARKET Protocol, there is no need to take custody of an asset. Using a series of smart contracts, a trader can gain the exposure he or she wants without having to constantly move coins from wallet to wallet. The contracts are also fully collateralized using smart contracts to eliminate counterparty risk. Users can trust that their funds are secure while managing their desired market exposure.

    Please visit for more information, and join our discussion about MARKET Protocol onTelegram.

  • MARKET Protocol Community Call + AMA

  • MARKET Protocol Partners with Top Decentralized Exchange - DDEX

    MARKET Protocol is pleased to announce a partnership with DDEX! As a decentralized exchange, DDEX plans to implement MARKET Protocol alongside their existing spot trading. MARKET Protocol was built to enable buying or selling of derivative relationships in a DEX environment without the need to borrow or take custody of the underlying reference asset. Through derivative exposure DDEX’s users are no longer limited by existing ERC20 to ERC20 relationships and opens the door for expanded on-chain, off-chain and cross-chain offerings all within a safe and solvent trading ecosystem.

    DDEX has focused on delivering an easy and intuitive trading experience. Seth Rubin, CEO and co-founder of MARKET Protocol said, “We have watched DDEX do a great job growing their user base and product offerings by simplifying the entire decentralized trading process and look forward to working together.” Bowen Wang co-founder of DDEX mentioned, “MARKET Protocol allows us to provide a range of unique trading relationships within our existing infrastructure. We can create many new trading opportunities for our users they can’t get anywhere else.”

    About MARKET Protocol:

    MARKET Protocol has provided the open source foundation needed to build decentralized exchanges and conduct trading activities on the Ethereum blockchain. It provides the framework enabling traders and businesses to buy and sell digital and real-world assets in a safe, solvent and trustless marketplace.

    More information can be found

    Join MARKET Protocol’s Telegram!

    About DDEX:

    DDEX is the most user-friendly decentralized global exchange for ethereum-based tokens. Currently, DDEX allows users to trade ERC-20 tokens from wallet to wallet with no possibility of theft, no withdrawal fees, and no uncertainty of deposit/withdrawal lockup periods. Working to dispel the myth that decentralized exchange are slow and hard to use, DDEX utilizes hybrid technology which makes DDEX as fast as a centralized exchange.

    More information can be found

    Join DDEX’s Telegram!

  • MARKET Protocol announcing Havven Partnership!

    MARKET Protocol, a decentralized derivatives protocol designed to deliver on-chain, cross-chain and off-chain trading, is pleased to announce a partnership with Havven — a decentralized payment network and stablecoin. Stablecoins have all the benefits of other crypto assets while adding the utility of a stable medium of exchange. They are often pegged to traditional fiat currencies or physical assets like gold.

    Derivatives are contracts between two counterparties denominated in a base token deriving value from a reference asset all without ever taking custody of that asset. Anyone can create MARKET Protocol contracts with dollar proxy — eUSD as a base token resulting in relationships like eUSD versus the S&P 500 index. Alternatively, contracts can be generated for cross-chain relationships like eUSD/Monero providing eUSD/Monero price exposure without ever taking custody of Monero or converting to fiat in a decentralized, safe and solvent environment.

    eUSD is the initial stablecoin within the Havven network, and is a major step towards the release of havven-backed nomins, the final stablecoin iteration that launches on June 11. As part of the launch of eUSD, Havven created a tool to simplify the process of converting your ETH into eUSD and vice versa. eUSD and future nUSD stablecoins can also be used as a payment method on the Havven eStore.

    Seth Rubin, CEO of MARKET Protocol, says, “Havven presents a unique and thoughtful stablecoin model. It’s great to see a team deliver so quickly in production.” Kain Warwick, Founder of Havven, says the partnership is a mutually beneficial one: “MARKET Protocol provides businesses and users with the framework to effectively manage risk, and a stablecoin will help combat another major risk — price volatility.”

    To learn more about MARKET Protocol, its partners, team members and development progress, join the ongoing discussion on our Telegram, subscribe to our newsletter and follow MARKET Protocol on Medium.

    More information on Havven is available on their website and for any questions about the project, join their Telegram chat

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