Democratize access to pre-public markets.

Protocol Overview:

Cypher is a decentralized synthetic asset protocol on the Solana blockchain that facilitates price and demand discovery in nascent markets. Initially, users will be able to mint and trade synthetic assets representing the valuation of late-stage private companies before they go public.

Derivatives Pricing:

  • Open interest in a synthetic asset is financially settled on IPO day at the closing price-per-share, which is obtained by price oracles (Pyth Network).
  • Before this final settlement, users are able to trade the synthetic assets on an intraday basis and provide their opinion on a company’s IPO valuation.
  • Users can go long or short and leverage their positions according to their conviction.

User Experience

At first, this might sound fairly complicated. Fortunately, the assets created on the cypher protocol are tradeable on the Serum decentralized orderbook, which means its synthetic assets trade with familiar limit and market orders. Additionally, one can manage liquidity without worry of AMM slippage and/or impermanent loss, which allows users to make long or short bets with ease.
  • If users believe a company will IPO at a price higher than where the cAsset is currently trading, they can enter a long position with synthetic assets before the IPO. If the user’s prediction is correct, and the valuation increases between when they buy and the end of IPO day, the synthetic asset will settle at a higher price than what the user paid, and they will realize a gain.
  • Alternatively, if a user believes an IPO is being overvalued, he or she can short the synthetic instrument and receive a payoff proportional to the degree that their prediction was correct at the time of IPO or acquisition.

Market Efficiency Improvements

This market dynamic should lead to an efficient pricing of the synthetic shares and provide a valuable data point to banks or companies trying to accurately price their initial public offerings, as well as democratize access to historically inaccessible private markets.