Tracer: Usable Factory Contracts to Create Derivative Products

Have you ever thought about deploying your own derivatives market? Tracer claims you can do just that, and then some. Through their “Factory Contracts,” you can create an option, future, or swap product around any asset, price, or data feed. The protocol promises to be “censorship-resistant,” to provide “high levels of security to its users,” and to use “open-source code” and “reliable Oracle architecture.” 

The whole Tracer ecosystem runs on the Ethereum blockchain, which comes with its own set of advantages and disadvantages. 

According to their website, “Tracer is able to host an ecosystem of financial contracts such as derivatives, lending and borrowing tools as well as spot exchanges that will support the future of financial transactions. Once a financial contract has been deployed, it is entirely permissionless, unless codified otherwise.” The process is similar to creating a marketplace in Uniswap, which may have been the inspiration for the Tracer project. 

So far, you can only create Pools, and there’s not even an interface for that yet. Using Perpetual Pools V2, you need “a little bit of tooling and technical know-how,” to create these new financial products. The interface and new Tracer products are coming. 

The traditional derivatives market is worth an estimated one quadrillion dollars. And Tracer is here to eat its Web3 lunch. Or at least try to.

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What is the Tracer DAO responsible for?

As it happens with most new-age Web3 protocols, a DAO controls the whole operation. According to Tracer itself, “Tracer DAO governors will be at the forefront of financial innovation and act to guide the transition from the current way we do digital finance to a more secure and scalable system. Governors will be responsible for creating and managing efficient financial tools and protocols that will become the standard financial transaction layer for the future.” 

They are actively looking for “governors” in many categories. Click on the previous link for more info.

DAO governance is pretty much the norm for today’s Web3. Tracer has an ace up its sleeve, though. According to the DAO’s service agreement, “Service Providers who receive TCR tokens as consideration for some, or all, of their services will automatically become members of the DAO and have the ability to make Proposals, vote on future Proposals, and thereby manage Tracer’s governance mechanism, financial contracts and other protocols.” That’s smart, giving them skin in the game. Getting all clients involved in the success of the Tracer ecosystem might incentivize them “to perform services with the highest level of quality.”

The people behind Tracer and its DAO seem to be genuinely concerned about governance. According to them, “each decision made by Tracer DAO must be debated with rigor and objectivity.” Plus, “potential governors should stay up-to-date with Tracer and its resources.” Besides that, members of the Tracer DAO could be responsible for distributing the TCR governance token, deploying liquidity mining protocols, or installing new financial contracts,  among other things.

The company’s Governance App is crucial for all of this. It’s convenient and it allows for the process to work transparently. However, it seems like it presents a single point of failure, which is not good for a supposedly decentralized product.  

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What about those juicy Perpetual Swaps And Pools?

According to the company’s internal documents, “Tracer’s open-source and accessible perpetual swap framework is a way for any application or user to gain exposure to any asset at any time. The Tracer Perpetual Swap is an entirely permissionless protocol that appropriately aligns the incentives of liquidators, oracles, liquidity providers, insurers and traders.” As a company, they believe that traditional perpetual swap contracts are centralized and use “risky liquidation and insurance mechanisms that rely on third parties.” 

Tracer is here to disrupt all that. The organization claims they provide maximum exposure, minimum costs, and incredible security. “The base asset that clears and settles the agreement can be any ERC20 and the quote asset can be any derivative with an accessible price feed,” they state confidently. 

Tracer’s Perpetual Pools mechanism allows any user to create “long term, non-liquidatable, leveraged” tokens “on anything which can be represented as a data feed.” For example, “the price of Bitcoin, the temperature, the inflation rate.” That also means users can create a marketplace for real-world assets that are “typically hard to access.” For example, gold, lithium, and “stocks which aren’t listed in your country using equities markets.”

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Buy/No Buy recommendation

Unlike most products and services SmartBlocks features, Tracer is not selling a token. Their product is a service that the world might or might not need. Is it a good idea? We would say yes, considering that in traditional finance there’s a huge market for what they’re offering. However, that idea is still in development, even their flagship product is not ready for primetime yet. 

Also, take into account that while creating new pools is still technically challenging, you could buy leveraged pool tokens right now. The available markets are BTC/ USD, ETH/ USD, and WTI/ USD. The WTI refers to the West Texas Intermediate, which according to Investopedia “is the underlying commodity of the New York Mercantile Exchange's (NYMEX) oil futures contract and is considered a high-quality oil that is easily refined.” So, it’s a working example of a market based on a real-world asset. Tracer is still in development, but it seems to work. This might be the right time to jump in, if you believe in their product.