Centralization Pressure

The design of AnyHedge does not involve a central, systemic point of failure, and can be executed by any combination of Hedge, Short and Oracle. Centralization pressure will exist on various parts of AnyHedge and we expect it to ease as adoption and diversity rises, as described below. Failure of the ecosystem to diversify may result in a system that is more fragile than expected.

1. Oracle Pressure

While an AnyHedge contract is designed to use any oracle the Hedge and Short desire, in practice we expect there to be a limited number of public and reputable oracles. At scale, if the choice of oracles is too limited, failure or compromise of oracles can present a systemic risk to the setup similar to their semi-centralized role in other decentralized finance systems. As adoption of AnyHedge and other oracle utilizing contracts increases, we expect a market for properly incentivized oracles to emerge with diverse business models, easing this pressure.

2. Liquidity pressure

AnyHedge contracts can be constructed ad-hoc between any two willing parties. However, finding a willing counterparty at a desired set of parameters, in a timely fashion, and at a reasonable premium is essential for AnyHedge to have significant utility at scale. If matchmaking activity is concentrated in the hands of few centralized exchanges, they can censor and otherwise impose non-optimal conditions on AnyHedge users.

As AnyHedge is not fundamentally tied to any outlet, we expect that censorship and non-optimal conditions will be countered as liquidity flees either to other exchanges, decentralized setups or ad-hoc bazaars. Federation between exchanges can further discourage these pressures from rising in the first place.

3. Regulatory pressure

Regulatory pressure is a common concern for all cryptocurrency activities including derivatives. Regulatory bodies can attempt to impose reporting and tracking burdens, reducing the number of exchanges that can comply. The non-custodial nature of AnyHedge should afford it an edge over custodial solutions when it comes to regulatory pressure. Assuming liquidity and oracles are sufficiently distributed, there are only limited ways regulatory bodies can censor the system as a whole. Even at exchanges that regulatory bodies apply pressure to, they can censor but not compromise funds.

Third party audit of mathematical soundness.

We take the reliability of our protocols very seriously, so we had a third party do a mathematical analysis of the AnyHedge protocol.

Read the results