This is how the first virgin olive oil derivatives market has been created
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The olive oil derivatives market is here. It is now possible to trade through the platform, despite the difficulty of its launch.
Business Insider Spain has had an exclusive conversation with Ismael Santiago, one of the promoters of this ambitious project, to detail how the process has been, as well as the obstacles that he has had along the way, which, according to his point of view, have been many during these last months.
Santiago explains that the idea was originally conceived with the OLIVACOIN cryptoasset project, which prioritized becoming a blockchain market for olive oil futures to provide traceability, coverage, and transparency in a traditionally OPACO market. "The regulation at the time OLIVACOIN was not the most positive but nowadays everything is very different with the new regulatory Sandbox," he points out.
In this sense, the official presentation of the blockchain platform of the olive oil futures market will take place on March 25, at the College of Economists of Seville, within a conference on blockchain and its impact on the accounting and auditing sector.
Difficulties of all kinds for its launching with special emphasis on the Administration
The steps leading up to its construction, says Santiago, have been far from easy: "It has been enormously hard work, with many people jumping on the bandwagon not to move the project forward but to see what they could get out of it, something unfortunately very Spanish.
As he describes, everything changed when this initiative met along the way with the Russian technology project OPIUM NETWORKS, specialists in blockchain financial derivatives, and the work of the CRYPTO PLAZA Hub, specifically Jesús Pérez, has also been remarkable.
However, the road has not been without bumps in the road. "In terms of obstacles we've had? All there is, zero support," he criticizes. "It is a lie that the Central Administration supports business R&D or the research itself (we have seen it with the COVID-19), or perhaps I have had the bad luck of not knowing it in Spain, too much unworthy posturing... Then we complain that talent is going to Andorra. It's very frustrating," he emphasizes.
But his criticism goes beyond the difficulties in carrying out this launch of the olive oil derivatives market in Spain. "Let's hope that the regulatory sandbox is not 'just another joke of the Sánchez Administration' and that it really is something useful and its usefulness can be demonstrated since we really need it," he says.
It should be noted that the regulatory sandbox is a space for experimentation to promote innovation in financial services within a secure environment. It will represent a step forward in Spain's innovative development and in the evolution of fintech.
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In fact, the Ministry of Economic Affairs reported that 67 projects have been submitted to the financial sandbox in its first round. Santiago has doubts about this dynamic due to the other obstacles he claims to have encountered from the Administration during these months of the pandemic.
Faith in the project, but not in the short term
In terms of expectations and the volume they believe they can capture, he predicts a path not free of some difficulties, although in these first days of launching: "We see exponentiality in the medium term, in the short term the survival of the project will be determined, we are already very forged in the guerrilla war".
"We have faith in the project, but alone we will not go anywhere, let's hope that the sector really supports this initiative," he adds.
Santiago believes that attracting a greater volume of investors will depend on the companies in the olive oil sector, who see the opportunity to hedge on prices and thus not incur in producing at a loss, which is not legal in Spain according to the food chain law.
"I think it will be slow and very tortuous at first, a situation we are used to, by the way, but in the end time takes away and gives reasons, in this project I have confidence as well as in the entrepreneurship of the Spanish olive oil sector that will not miss this opportunity," he explains.
The need for decentralized derivatives in the markets
Much has changed since the first financial derivatives contracts were issued several centuries ago. One of the oldest derivatives is the rice futures issued on the Dojima Rice Exchange several centuries ago.
Now, financial derivatives are a crucial part of the global financial system. They are financial instruments that allow market participants to manage their risk without sacrificing potential returns.
Simply put, these assets allow market participants (traders, hedge funds, etc.) to "hedge" against certain market risks to avoid massive losses in the case of unforeseen events such as high price volatility. While derivatives were initially used for commodities such as rice or grains, they are now being leveraged to hedge risks in various assets such as stocks and even cryptocurrencies.
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The decentralized finance (DeFi) sector took the world by storm in 2020. Smart contracts allow market participants to cut out the middlemen and rely on trustless contracts that guarantee faster, cheaper, and safer deals, leading to 2021, the year of decentralization of these financial tools.
In this vein, Opium Protocol is a decentralized derivatives platform built on Ethereum. Founded in 2017, its Protocol has been in design for quite some time, as Santiago exposes. It is a complex system that aims to provide a user-friendly experience for investors.
Opium Exchange will allow anyone to issue and trade decentralized derivative instruments, such as futures or options, without any counterparty risk in a completely permissionless environment that can help retail users bypass local restrictions and take full control of their financial freedom.
This leads to Olivia Futures, a startup that will effectively issue the first decentralized olive oil futures product that will then be available for trading on Opium.
Olivia Futures is one of the first of 4 external companies that aims to bring its derivatives to Opium, taking advantage of the opportunity created by the current state of the Spanish olive oil market: the need for financial instruments that can help investors hedge against the risks caused by the volatility of olive oil product prices.
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