Advantages of derivatives in DeFi

• DeFi derivatives open the door for retail investors to a world that used to be very limited
• Decentralization and operating without a third party
• Many great platforms are progressing in their development every day and are available for trading DeFi derivatives

Disadvantages of derivatives in DeFi

• Regulatory issues may arise for certain DeFi derivatives
• Risks associated with oracle smart contracts, which these protocols must rely on as they do not have access to the necessary data outside of their protocol
• It may be the case that the auditor has not found a bug in the code that a hacker then notices and exploits, ultimately stealing the money deposited on the platform
• Speculation and the temptation of making a quick profit can deprive new and especially inexperienced market players of their money

How can I choose between derivative trading platforms?

Nowadays, there are a lot of new projects being created, so you should always start with conducting thorough analysis. Before you invest your money, you should at least find out detailed information about the project via the following basic aspects:

1. Do your own research on the platform, visit social networks (Twitter, Discord, etc.), ask for community references, monitor activity.
2. Check if the platform has passed basic security verifications like KYC or auditing. The role of auditors is to provide as much information as possible about the security of the platform.
3. Find out who is behind the development of the platform, what their previous experience is, how long they have been working on the current project and how active they are on social media.

Conclusion

As the DeFi world evolves, it will be interesting to see how the decentralized derivatives market changes over time, what new tools emerge, and which underlying assets are in the greatest demand. In the future, the DeFi derivatives market has the potential to reach huge volumes of  executed transactions. With decentralized derivatives, anyone with an internet connection can access these markets. Protocols focused on DeFi derivatives unlock the next level of financial products for the masses and transform the ancient financial system into a fairer and, more importantly, decentralized one.

Personal Opinion

Linking DeFi and derivatives is a technology that has brought the world another groundbreaking financial instrument. It's amazing to see more and more projects launching derivatives protocols and being able to create new and exciting financial products in a decentralized way. In today's world, there are already many platforms suitable for trading DeFi derivatives, and all derivatives are sufficiently collateralised. Beware, however, that the role of cybersecurity should by no means be underestimated, as even one incident, such a bug in the code and a subsequent hacking attack on the platform, can destroy the future of the entire project.You could lose your money and this would negatively impact general motivation to continue investing time and money in digital assets and Web 3.0. Always be prepared to take a certain amount of risk and diversify your investments wisely. Your main task is to ensure that you are making consistent profits with the least amount of risk possible. Always DYOR!