Margarita Finance Aims to Bring Structured Products to Solana
I was on a Google Meet with Benedikt Schuppli, co-founder and CEO of Obligate, when he shared an email from a Swiss bank displaying a 175% participation rate for a financial product. He suggested that if it weren't from a Swiss bank, one might assume it to be a scam.
The bank offered structured products, which Schuppli referred to as the “degen products of TradFi.” His startup, Margarita Finance, aims to adapt these products for the crypto space.
Margarita allows users to customize their yield appetite and risk tolerance. Schuppli believes blockchain can eliminate intermediaries that inflate costs, enabling a new market segment to access structured products appealing to DeFi users.
Structured products combine a bond and a call option, typically linked to a basket of assets or an index. They are designed to protect principal investments from losses due to asset depreciation, theoretically presenting lower risk compared to trading options alone.
Traditional structured products involve numerous middlemen who impose fees on investors. Margarita seeks to create a “fully programmable digital asset” that enhances transparency in fee structures.
Users can invest a minimum of 10 USDC with options based on SOL's price. Investors select their desired yield and maturity date, receiving a structured product contingent on whether SOL’s price falls below a specified barrier. Pricing is provided by Bermuda-based STS digital, accompanied by comprehensive legal documentation.
Margarita is being developed within Obligate, an on-chain bond platform operating on Polygon. The plan includes transitioning Margarita into a DAO post-launch of its network and token. Out of Obligate's 15 employees, five focus on Margarita. Schuppli noted that building on Solana was simpler than in an Ethereum-compatible environment due to Solana’s token-2022 standard.
Margarita recently secured $1 million in pre-seed funding and is currently seeking seed funding. It also received a grant from the Solana Foundation.
While other crypto projects have explored structured products, Margarita aims for user-friendliness. Schuppli criticized existing implementations as overly complex and technical, often created by individuals with a technical bias.
The effectiveness of Margarita in simplifying on-chain structured products remains to be seen, along with its appeal to DeFi users.