Under the current setup, Wall Street firms typically execute the trades and handle settlement afterward - helping to make sure the cash ends up with the seller, and will be reflected in the buyer's account. But for investors, the process can be slow and expensive due to the middlemen fees being charged, with settlement typically taking a day or two.
Goh was previously a trader in London for JPMorgan Chase, the largest U.S. bank, where he slung options on auto, chemical, consumer and industrial stocks. In other words, the options market is an arena he knows very well, at least in the traditional sense. Earlier this month, skew. which spells its name with a period announced $2 million in seed funding from several venture capital firms, including the Silicon Valley icon Kleiner Perkins.
The S&P Options Project was entirely experimental, Goh told CoinDesk the challenge was mainly to see if it could be done. Since the trade would essentially be automated via computer programming, it would be less costly to settle and conduct a lot faster, probably in just 10 or 15 minutes, according to Goh.
So on Sept. 6, Goh says he took some British pounds off an in-house research and development fund at skew. converted these into bitcoin, and then used the proceeds to buy 10 high-price call spreads a new type of option from Crypto Garage, all under a popular smart contract with terms agreed by both counterparties in minutes. The expiration date for options was set on the third Friday of the month, similar to the standard practice on many exchanges.
At the top of the blue string of letters and numbers, the ID number is the identification number for the transaction. On the left, the white string is the address where collateral is stored and the blue number is the amount of collateral in BTC. On the right are the top blue strings of the winning counterparty in the trade, who got the lost weight back and the blue address just below it is for winning counterparty, which got back the winning collateral. In red, on the lower right, it shows that the transaction was verified by the blockchain 2068 times, and then the yellow number of bitcoin is the total BTC proceeds distributed to the two counterparties from the collateral after deducting the fees.