Injective Protocol, a layer-2 derivatives platform, today announced a new strategic partnership with Lithium Finance to launch decentralized pre-IPO stock derivatives. Lithium is an oracle built to regularly price illiquid assets using collective intelligence.
Lithium’s proposition is facilitated by the Determinant Mutual Information (DMI) mechanism. This method enables participants to request pricing on specific private assets; while simultaneously incentivizing and rewarding pricing providers who offer truthful accurate answers. Likewise, the DMI mechanism punishes those who put forth inaccurate information.
A fundamental use case for this tech stack is pricing private market assets that are not yet actively traded. For instance, as it stands you would not accurately be able to know the share price of SpaceX since the stock is not yet live. If a user on Lithium wanted to know the value of SpaceX, he would post the question on the platform and stake Lithium tokens. Lithium will then leverage proprietary algorithms to poll a community of experts who are incentivized to win Lithium tokens if their answers are determined to be high-quality and to lose them if the answer is determined to be low-quality. As such, Lithium is able to price assets that would otherwise be inaccessible to individuals who are not industry insiders.
Decentralized Pre-IPO Derivatives
Injective currently offers access to a number of distinct oracle providers such as Chainlink, Band Protocol, and API3. Adding Lithium allows Injective Protocol to boost the number of markets available.
Using Lithium’s price oracle, users of Injective can create new derivatives markets for private companies. Consequently, the Injective exchange protocol would be able to support trading for futures and perpetuals for private market deals that are not available anywhere else. A trader would use Injective’s governance module to create a new market for non-public companies.
“Lithium will be a crucial addition to our oracle module. Since it would allow our users to discover new illiquid private markets that would otherwise be inaccessible. Our collaboration will help to lower the barriers to entry for users looking to enter new private markets in a completely decentralized manner.”
– Injective Protocol CEO, Eric Chen
Injective users will also enjoy the added benefits of avoiding gas fees and speedy transaction times when trading on these new markets. Fusing the strengths of Lithium’s on-chain pricing oracle and Injective’s derivatives offering, both teams will work to bring pre-IPO derivatives into the DeFi sector.
“The main focus of Lithium Finance is to price the unpriced in a timely and accurate manner, and we are glad that Injective shares this view and make Lithium part of the oracle module to help on pricing private and illiquid assets. We believe this partnership will help make private assets more accessible, and it’s an important step in bringing real assets into the DeFi space.”
– David Lighton, Co-Founder of Lithium Finance
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