Swaps

 Basics

• From DeFi Weekly (10-4-2020):

"The simplest way to think of a swap is the exchange of cash flows at prespecified terms in advanced. In the traditional world, a company might create a bond that pays LIBOR + 1.5% profit. In order to make their interest payments more predictable, they might enter into an agreement with another party that pays a constant, fixed amount of interest (say 5%). If LIBOR increases above 3.5% then they'll be safe guarded since their interest payments are fixed at 5%. If LIBOR decreases below 3.5% then they'll be losing money since 5% will be greater than the actual payment required. The simplest way to think about it is that you're speculating on the interest payments rather than the value of an asset.

In the case of DeFi, the most wished-for liquid swap market is a fixed vs variable swap market for DeFi lending rates. Liquidity is most likely the biggest bottle neck and buyers and sellers on both sides can't make strong bets on what they think will happen in on-chain lending markets."

Projects

• From DeFi Weekly (10-4-2020):

"As of this time the space around DeFi swaps is pretty limited. The two projects I could find in this space were:

• UMA - is more than just synthetics but can also do swaps. Not live yet but apparently will be later on this year.
• https://swaprate.finance/ - pretty early stage. Tried using it but the interface was unfortunately too hard to use."