Decentralized Finance (DeFi) is one of the hottest and fastest growing areas of cryptocurrencies. According to Dune Analytics data, an estimated more than 4 million people around the world are investing in DeFi products. The total assets locked in the DeFi ecosystem are worth over $ 100 billion today.
The DeFi market is evolving rapidly, and companies are creating increasingly complex financial products, similar to those that have long been established in the traditional financial industry. Uniswap has created a whole new segment within the DeFi space as a crypto-native automated market maker (AMM), and the composite protocol has done the same for the crypto market.
Currently, Cega, a new protocol founded by former UBS Derivatives Trader Arisa Toyosaki, is embarking on the creation of a new category of exotic derivatives within DeFi. Toyosaki, who also heads marketing at Bitcoin.com, told TechCrunch in an interview that many of the strategies available to crypto derivative traders today are quite dangerous and are the motivational factor behind why Cega was founded. .. Exotic derivative protocol.
“If the market fluctuates by 10%, as a user investing in these products, we may actually lose our principals. We wanted to not only generate the high yields that derivative products and cryptocurrencies generate, but also think of something safer. That’s the way I thought about Sega, “says Toyosaki.
Cega’s decentralized application, which will be released in beta on Solana devnet later this month, will extend its product to other blockchains and become “quite quickly” compatible with the Ethereum Virtual Machine (EVM) ecosystem. I want to have it. Its first product is a fixed coupon note, which states that Cega will provide investors with excellent yields, downside prevention and combined returns.
Toyosaki has been looking at crypto space since 2016 when he worked at UBS in Hong Kong. She was then aware of the growth of the crypto market and considered launching a crypto derivatives platform, but other founders and financial experts in the field advised her that it was probably premature. After several years of product marketing, she revisited this idea during the 2020 “DeFisummer.” At this time, decentralized finance began to spread widely.
She considered launching a “vanilla” crypto derivative platform. It offers simple call or put options with no unusual features, and she realizes that her true passion lies in the exotic derivative space, building more complex and flexible products.
“I find the idea of maintaining a trading position not only up and down, but also volatility, that is, how much up and down is happening, is very attractive. You can bounce sideways or bet on a convex surface. You can bet on so many different types of views. Derivatives can make things so flexible that I’m always contributing to the rising crypto market and derivative disciplines. I wanted to see if I could do it, “says Toyosaki.
Pricing vanilla derivatives is much easier than pricing exotic ones. Vanilla derivatives are usually evaluated using the Black-Scholes equation, which Toyosaki described as a “plug and chug” strategy. In contrast, exotic options cannot be priced using simple formulas.
“In practice, you need to create multiple mathematical simulations for different market distributions. By running these stochastic simulations for 10,000 to 20,000 different scenarios, you will eventually create the price of the option. Therefore, the amount of mathematical understanding and engineering actually required to price an exotic option is much higher than that of a vanilla option, “says Toysaki.
Founded in 2020, the company today announced that it has raised $ 4.3 million in seed rounds. It is led by Dragonfly Capital Partners and includes Pantera Capital, Coinbase Ventures, Alameda Research, Solana Ventures and more. The round has valued Cega at $ 60 million, Toyosaki told TechCrunch.
According to Toyosaki, Sega reduced its target amount and started the financing process in January this year, and was able to secure it in just two days. The company will eventually invest more capital than originally expected and will expand rapidly this year by hiring engineers who are particularly familiar with the Rust programming language used in Solana.
The Sega team consists of four full-time employees, including Toyosaki, and three part-time employees. According to Toyosaki, the team includes quant traders with a PhD in stochastic volatility and traders with experience in pricing exotic options, and she says the company has an advantage in understanding the inside and outside of the product. Stated.
Cega aims to help users grow their wealth, but reducing the risk of DeFi for beginner to intermediate users is also at the core of its mission, Toyosaki said. She added that she is particularly excited about the opportunity to build a community around Sega and educate people about exotic derivative transactions.
Most of that community engagement takes place in the project’s Discord chat, Cega co-founder and marketing director Winston Zhang told TechCrunch.
“We want space experts to unite around the project and actually get involved in the project. As a community, influencing the types of products we launch and our direction. There are many ways to influence sexuality. Come in, “Zhang said. “We really want to give the community a strong voice and grow it with word of mouth.”
