In previous articles, we’ve talked about why conditional orders are a crucial next step for DeFi. We’ve also shown how conditional orders will help users yield farm and protect their assets.
Brink will launch with basic conditional orders like limit orders and stop-losses for all ERC-20 pairs, but that’s only the first step. At Brink, we’re excited about developing and releasing more complex conditional orders.
In this article, we will highlight the more complex types of conditional orders that the Brink platform supports. We believe that these will add significant value for our users by minimizing risk and maximizing profit.
A contingent order is one that executes after a specific trigger is met. Some examples of this include: (1) when a token reaches a 52 week high or low, (2) when the market cap of a token hits a certain level, or (3) when the market cap of a secondary token and not the one that the user is creating the order for hits a specific price. With the Brink platform, a trigger can be tied to any available data on the blockchain.
A trader purchases WBTC (Bitcoin) after a recent 20% pullback in price. This trader is risk-averse and isn’t looking for WBTC exposure over the long term. That user is confident that WBTC will reach its 52-week high again and that other market factors brought the price of WBTC down. They submit a contingent order to liquidate their WBTC holdings once it reaches its 52-week high again.
A multi-contingent order is an order that is contingent upon more than one trigger being met. This can be done across multiple different tokens. The most common example of this is having an order execute based on two different assets’ prices.
A trader realizes that two separate tokens are tightly correlated (this is quite common amongst many cryptocurrencies). For example, ETH (Ethereum) and WBTC (Bitcoin) are roughly 70% correlated. This means that if WBTC makes a sharp move, ETH is expected to do the same. This might not happen instantaneously and can be delayed, which leads to a potential trading strategy. The multi-contingent order could be set up as follows: if the price of WBTC increases by 20% and the price of ETH fluctuates by no more than 5%, an order to purchase ETH executes.
A one-triggers-the-other order effectively creates two separate orders. If the first order is executed, the second order will automatically be executed.
Cryptocurrency users will often hold multiple ERC20 tokens pegged to the same underlying asset. The most common example would be the numerous ERC20 BTC tokens such as WBTC, tBTC, renBTC, and sBTC. With a-one-triggers-the-other order, a user could set one order that would automatically liquidate all of their BTC pegged assets if a particular trigger is met.
A-one-cancels-the-other order is an order type that links two separate orders. If either order is filled, the other is canceled.
As previously mentioned, multiple ERC20 tokens are often pegged to the same underlying asset. While these tokens generally do an excellent job of staying close to their peg, they do drift a bit. A user would place a one-cancels-the-other order if they’re looking for exposure to an underlying asset but don’t care which specific token they purchase. For example, a user might want exposure to BTC. They don’t care if they receive WBTC or tBTC; they just want to get the best price. That trader could set a one-cancels-the-other order for both tokens at a low limit price. The first of those two tokens to hit that price will be purchased, while the second order will be canceled.
At Brink, we are building critical infrastructure for conditional orders on DeFi. Brink is a fully permissionless, decentralized, and community-driven project that allows users to execute conditional orders against any on-chain liquidity source.
Brink Ninja Beta
Our ninja beta app is live at brink.ninja. The beta is currently closed to users who meet certain criteria for early adopters. Talk to us about joining.
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We’ve done our best to deploy secure code, but Brink has not been audited by a 3rd party. Like any Dapp, use caution, and be aware that there is always a risk of fund loss.