Continua Finance
Continua is a novel perpetual interest rate AMM. It enables users to trade the yield that will be earned by an income-generating asset during a specific future window of time.
Instead of calculating the total yield an asset earns between now and a maturity date, Continua defines individual time periods in the future and separates out the yield earned in each. Then it turns the rights to yield from each of those time periods into a token that is priced and traded independently.
Users can buy or sell the yield from a specific window of time in order to hedge, lock in a rate, or express a more granular view on how rates will change. The market automatically extends as each period ends, so the future yield of any asset can be traded in perpetuity without requiring new markets to be created at every maturity.
How it works
A user deposits a yield-bearing asset, such as a tokenized Treasury bill, into Continua. The asset is separated into two components:
- Principal: This is the claim on the underlying asset and the right to receive new yield strips as the market automatically extends.
- Yield strips: These are the individual claims on the yield generated during each period along the curve (Q1, Q2, Q3, and Q4, for example).
Each strip is a separate token with its own automated market maker (AMM) and an independent price. The individual AMMs for each strip share the same pool of the yield-bearing asset, so one pool of capital can provide liquidity across the entire curve.
The rate market for on-chain finance
Continua’s first product is the venue and infrastructure for creating and trading future yield strips. Initial users will be treasuries, funds, protocols, and trading desks that hold large positions in on-chain assets with variable yield, plus individual traders seeking to express views in these markets.
Continua allows users to:
- Convert variable future yield into fixed income
- Hedge or trade specific rate windows
- Gain capital-efficient exposure to yield without purchasing the underlying asset
- Price the future yield of any income-generating asset via a forward curve
- Access interest rate markets through transparent on-chain contracts
- Build and access automated strategies that allocate and rebalance across periods
Vault products
Continua’s planned vault products give users three ways to put capital to work:
- AMM Liquidity Vaults: Supply liquidity for yield-strip trading and earn a share of trading fees.
- AutoQuant Vault: Allocate capital to an automated strategy that buys, sells, and rebalances yield strips using the Kelly Criterion for inventory management.
- LVR Insurance Vault: Earn premiums by providing capital to cover eligible liquidity provider losses, up to defined policy limits.
Looking forward
The long-term opportunity for Continua is to become the default infrastructure for pricing and trading future income on-chain. Continua enables the creation of tradable forward curves for any tokenized asset; this will allow the largest markets that exist in traditional finance to move on-chain and benefit from the transparency, accessibility, and composability that’s unique to on-chain finance.
Continua will be the venue through which this transition happens.
For investment discussions, please contact us.
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