Decentralized finance is one of the fastest-growing areas in the world. According to data from Dune Analytics, an estimated 4 million people worldwide have invested in DeFi products. Today, the total value of assets locked in the DeFi system is over $100 billion.
The DeFi market is evolving rapidly, with companies spinning up increasingly complex financial products akin to those that have long taken hold in the traditional finance world. Uni swap created an entirely new segment within the DeFi space as an automated market maker, and the Compound protocol did the same for money markets.
Cega, a new protocol founded by a former derivatives trader, is setting out to create a new category called exotic derivatives. In an interview with TechCrunch, she said that many of the strategies available to traders of cripto derivatives are fairly risky and that's why she founded Cega, which she says is the first-ever Defi exotic derivatives protocol.
When the market moves 10%, as a user that is staked into these products, you can sometimes lose your principal. I wanted to think of something that creates a high yield and is also safer, and that's how I thought of Cega.
Cega's application is set to launch in a public test later this month on the Solana Developers' Network, though it hopes to expand its offerings to other blockchains and become compatible with the EVM. Cega says that its first product is a fixed-coupon note that offers investors superior yield, downside protection and compounded returns.
She was working at a bank in Hong Kong and had an interest in the space. She noticed the growth of the market and contemplated launching a platform, but other people in the space advised her that she was too young. During the Defi summer of 2020, she came up with the idea of a product marketing company.
She was interested in launching a simple call or put options platform, but realized her true passion was structuring more complex, flexible products in the exotic derivatives space.
I think the idea of being able to hold a trading position on both up and down is fascinating. You can bet on many different types of views. You can make things so flexible with derivatives, so I've always wanted to see how I could contribute to the risingcryptocurrencies market and my specialty with derivatives.
Pricing exotic derivatives using a Black-Sholes formula is much more complex than pricing vanilla derivatives using a simple formula. Exotic options cannot be priced using a formula.
We have to create multiple mathematical simulations on the distribution of markets. The price of the option can be created by doing these simulations of 10,000 to 20,000 different scenarios. The amount of mathematical understanding and engineering that is required to price exotic options is much more than a vanilla option.
The company, founded in 2020, announced today that it raised a $4.3 million seed round led by Dragonfly Capital Partners. The round values Cega at $60 million.
In January this year, Cega launched its fundraising process with a lower target amount, which it was able to raise in two days. She said that the company will use the capital it took in to scale quickly this year, particularly by hiring engineers familiar with the Rust programming language.
The Cega team is made up of four full-time employees and three part-timers. The team includes a quant trader with a PhD in stochastic volatility and traders with experience pricing exotic options, which she said gives the company an advantage in terms of understanding the product inside and out.
Reducing the risks beginner to intermediate users take in DeFi is a core mission of Cega. She is excited about the chance to educate people about exotic derivatives trading and build a community around Cega.
The majority of community engagement takes place on the project's Discord chat, according to Cega co-founder and marketing head.
We want the experts in the space to coalesce around the project and really get engaged with the project, because there will be lots of ways for them to influence the types of products that we launch and influence the direction that we go in.
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