Understanding Autonity

Autonity is an EVM based public blockchain for decentralized derivatives clearing.

The purpose of the Autonity project is to help make every underlying risk that the market wants to speculate on or hedge against into a smart derivative product that is tradable between anyone in a logically decentralized ecosystem of price discovery and trade execution.

Risk is arguably the most important commodity in the world, as everyone has some of it, but only some want it, so value is created whenever risk can be transferred between consenting parties at market prices. However, the space of tradable risk in TradFi markets is much too narrow, and DeFi derivatives today are largely confined to crypto asset underlyings.

The current market structure of DeFi derivatives is hampered by its adoption of a TradFi futures exchange model where derivatives exchanges are integrated with their respective on-chain clearing mechanisms. This results in the fragmentation of liquidity over many different pools of open interest in the same product underlyings, preventing the ecosystem from scaling market liquidity to meet potential demand.

Autonity solves this problem with its model of decentralized clearing through a new Layer 1 blockchain network. For smart derivatives products on Autonity, multiple different trading protocols and execution modalities can submit trade executions for clearing on the same pool of open interest, bringing about a logically decentralized ecosystem of price discovery and trade execution under a unified market of off-settable positions in smart derivatives products.

Autonity is for developers of quantitative trading strategies, data scientists, mechanism design experts, trading venues, and the emergent ecosystem of service providers devoted to solving the practical problems of open and decentralized market structures that are enabled by blockchain protocols.

As a purpose-built protocol, the tradeoffs made in Autonity's consensus and mechanism design are informed by the anticipated requirements of a settlement layer for smart derivatives contracts. Some of the key differentiating features of Autonity are:

Autonity's native utility coin, the Auton (ATN), is designed to be an optimal collateral asset for markets made up of counterparts in different currency areas, trading contingent claims that have no intrinsic fiat currency denomination;

Autonity's staking model is designed to make it capital efficient for its community to simultaneously contribute to network security through staking, whilst deploying collateral for the settlement of use-cases built on Autonity;

Autonity's staking accountability module allocates penalties in a way that de-incentivizes concentration in voting power that is a common tendency in many BFT-based, delegated proof-of-stake protocols.