Today, we saw Strike Protocol – an Ethereum-based derivatives protocol enabling perpetual swaps for any asset – come out of stealth mode.

The derivatives protocol is backed by Binance Labs and features Uniswap-like Automated Market Makers (AMMs) along with built-in liquidity reserves that back and secure the AMMs. This is a massive benefit over incumbents as traders can trade directly with Strike’s smart contract without the need for any counterparties.

The prices of the assets are set automatically by the AMM which, similar to Synthetix, is backed by the protocol’s native token, $SKE.

SKE tokenholders can become liquidity providers by staking SKE in the liquidity reserve. Stakers always ensure Strike’s AMM is sufficiently collateralized and are rewarded in transaction fees and staking rewards in the form of native inflation for doing so.

What’s interesting about Strike is that traders can take both leveraged long and short by purchasing Strike’s ERC20 leveraged tokens from the token factory, opening up another degree of composability for Ethereum’s money protocols.

Key Features

Some of the more notable aspects of Strike include:

20x Leverage On-Chain Perpetual Swap 

Access up to 20x leverage positions both long and short with only a 0.1% transaction fee. Strike is entirely non-custodial and permissionless, meaning anyone in the world with an internet connection can access the derivatives protocol.

Trading both On-Chain and Off-Chain Synthetic Assets 

Strike not only supports Ethereum-based assets, but a wide range of traditional assets like gold, crude oil, fiat currencies, and other crypto-assets like BTC. The protocol will initially launch with ETH/USDC and BTC/USDC with more assets to be supported using a decentralized governance framework.

Guaranteed Liquidity Provided by AMM

Similar to Uniswap, Strike’s AMM guarantees on-chain liquidity by the collateralized assets from stakers and drastically improves on the inefficiencies with most orderbook-style DEXs regarding slippage and liquidity.

 

 

 

Why SKE?

Strike Protocol will also introduce a native token, SKE which serves two primary functions within the protocol:

  • Staking: SKE holders can stake tokens to the Liquidity Reserve, which is used as the last line of defense to cover unexpected losses. In return, stakers are rewarded with a percentage of the transaction fees plus staking rewards once every 7 days.
  • Governance: Once the protocol has matured and there’s a broad token distribution to active community members, Strike will gradually transition into a DAO, ultimately allowing the community to control any future changes to the protocol.

Strike features a 0.1% transaction where half of the transaction fee is deposited into an insurance fund to cover any unexpected losses while the other half is distributed to the system’s stakers. Rewards are issued once every 7 days, starting at 0.5% weekly inflation with a decay rate of 0.075% over 4 years.

To provide some additional color on this, here’s a table outlining SKE’s monetary policy for the next four years.

PeriodToken CirculationStaking RewardsInflation Rate
Initial Supply100,000,000--
Year 1122,520,76922,520,76922.52%
Year 2138,215,76915,695,00012.81%
Year 3148,461,24010,245,4717.41%
Year 5154,893,5016,432,2614.33%

Closing Thoughts

In short, Strike Protocol democratizes access to futures and other derivatives. With an expected alpha launch in the coming weeks and a full mainnet anticipated for this summer, the derivatives sector is starting to heat up.

Just last week, we saw UMA go live with their Initital Uniswap Listing, following the launch (and close) of FutureSwap. This also ties into dYdX and their recent launch of permissionless 10x Bitcoin perpetual futures. Across the board, we’re seeing that more projects are offering users with leverage, signaling that trading Ethereum-based assets has never had as much rocket fuel.

One thing that’s not noted in the announcement article is the SKE token distribution mechanism. With the emergence of the SAFG and similar token distribution frameworks, it will be interesting to see Strike Protocol’s approach. Given their backing by Binance Labs, we could even SKE being offered via an IEO.

However, this is all speculation for now. We can expect more details surrounding the SKE token as the protocol approaches its mainnet launch later this year. To be the first to hear about it, fill out this form.

Until then, we’ll keep an eye out on this new derivatives protocol which you can to by following their official Twitter or by joining the conversation on Discord