Contango Exchange (external doc)
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Contango Exchange (external doc)
BASICS

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How it works

Contango protocol synthesises futures positions by using spot exchanges and borrowing / lending at a fixed rate, i.e. cash flows of futures positions are replicated with fixed interest rate markets. The different steps are realised atomically, i.e. in one transaction each time a trader buys or sells a futures. If for any reason the transaction fails then no position will be taken neither by the trader nor by the protocol.

Position opening

Below are presented the steps to open a futures position.
⁠
steps to open a futures position
⁠
⁠
Short
Long
1
1. Trader sells a futures
1. Trader buys a futures
2
2. Protocol borrows the base currency
2. Protocol borrows the quote currency
3
3. Protocol sells the borrowed amount for an equivalent amount of the quote currency on the spot market to synthesize a sell short position.
3. Protocol sells the borrowed amount for an equivalent amount of the base currency on the spot market to synthesize a long position
4
4. The amount of the quote currency is lent
4. The amount of the base currency is lent
There are no rows in this table
⁠

Position closing

Below are presented the steps to close a futures position.
⁠
Steps to close a futures position
⁠
⁠
Short
Long
1
1. Trader sells a futures
1. Trader closes a long position
2
2. Protocol gets the principal and the interest from lending the quote currency
2. Protocol gets the principal and interest from lending the base currency
3
3. Protocol swaps the quote currency for the base currency on the spot market
3. Protocol swaps the base currency for the quote currency on the spot market
4
4. Protocol gives back the borrowed funds including the accrued interest
4. Protocol gives back the borrowed funds including the accrued interest
There are no rows in this table
⁠

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