What is Forwards

Forwards is revolutionizing the $3 trillion crypto market by eliminating its most restrictive limitation: the requirement for trades to execute and settle simultaneously. By decoupling trade execution from settlement, Forwards unlocks transformative possibilities that redefine capital efficiency, liquidity, and security across DeFi.

For the first time, Bitcoin can be traded in a fully decentralized and anonymous manner while remaining securely in cold storage until settlement. This groundbreaking approach eliminates the need to move assets into hot wallets or centralized exchanges, addressing one of the most significant security risks in crypto trading.

Forwards enables the trading of previously inaccessible assets, such as staked tokens (with over $64 billion locked on Ethereum alone), vesting rewards, LP positions, and governance-locked tokens, without requiring unstaking or waiting periods. Furthermore, vesting tokens can be traded anonymously without revealing private details, preserving user privacy while unlocking liquidity in locked assets. These innovations create entirely new markets and liquidity opportunities for users.

Traders gain access to advanced financial capabilities traditionally reserved for institutional markets. These include trading without 100% upfront collateral, deploying capital across multiple strategies simultaneously, and executing sophisticated instruments such as forward contracts, cross-chain trading without bridges, and shorting with fixed funding costs. These powerful tools with flexibility and efficiency that the current DeFi infrastructure cannot support.

In addition to unlocking liquidity and efficiency, Forwards introduces new financial instruments by enabling the monetization of future revenues. Validators can sell staking rewards before issuance, developers can trade future protocol fees, and liquidity providers can realize earnings before vesting periods end. This innovation mirrors traditional finance’s settlement models while maintaining DeFi’s transparency and decentralization, making it a compelling proposition for institutional investors seeking familiar operational frameworks.

By decoupling execution from settlement while ensuring robust on-chain security, Forwards bridges the gap between DeFi and traditional finance. It expands the addressable market by trillions of dollars and positions itself as foundational infrastructure for next-generation DeFi. For investors, this represents a rare opportunity to participate in a paradigm shift that will underpin the future of decentralized finance, offering a solution as essential to DeFi’s growth as exchanges or AMMs but designed to overcome the limitations that have constrained DeFi’s growth for years.

Forward Contracts as the Foundation: Architecture and Use Cases

This document will cover the big picture architecture of the forward chain and its ecosystem. Forwards are versatile financial instruments that can be utilized in various applications. Therefore, it is essential to implement them in a way that allows for universal applicability. A wide range of potential use cases and applications can be implemented on top of forwards chain. Take a look at the big picture to see how the ecosystem is expected to evolve.

Note: EVM support has not yet been introduced to the chain. The examples above illustrate the variety of options that can be supported through this simple yet powerful architecture.

As shown in the diagram, Forward contracts are the foundational building block of the Forward Chain. By leveraging these contracts, any user, module, or third-party dApp can create an agreement between two accounts to trade a predefined set of assets instantly, with settlement deferred to a later time.

This architecture unlocks a wide range of powerful use cases, including:

• Price Locking: Lock in asset prices for future delivery—ranging from minutes to days.
• Delegated PoS Assets: Trade staked assets with settlement after the unbonding period.
• Vesting Tokens: Secure future prices for locked Team/VC tokens without revealing identity.
• Native BTC Trading: Enable BTC trades held in cold storage, with private settlement via a trustless bridge.
• Future Yield Monetization: Monetize upcoming staking, mining, or farming rewards in advance.
• Hedging & Shorting: Enter fixed-price contracts to hedge or short major assets like BTC, ETH, or SOL.

These use cases have been implemented using built-in modules. However, the architecture is intentionally open and flexible, allowing third-party developers to build custom applications on top of Forward contracts.

Core Use Case Categories for Forward Contracts

1. Speculation & Price Prediction

• Price Betting: Users can enter into contracts based on future asset prices. If BTC > $60K in 7 days, one side profits; otherwise, the other does.
• Event-Based Settlements: Settle contracts based on on-chain or off-chain events (e.g., merge dates, token unlocks, product launches).
• Pre-ICO Token Sales: Projects can launch forwards for tokens before their ICO, locking in funding at preset terms with deferred delivery.

2. OTC & Custom Trading

• OTC Agreements: Facilitate direct asset swaps between institutions or whales without affecting public order books.
• BWIC (Bids Wanted In Competition): Sellers issue a request for bids on future-settlement asset sales, and buyers compete for the best terms.
• Illiquid Asset Forwarding: Trade hard-to-move tokens or rare NFTs for future delivery when liquidity is available.
• Real-World Assets (RWA): Tokenized real-world assets, such as real estate or commodities can be sold and settled through forwards.

3. Bilateral and Private Agreements

• Private Credit Lines: Lend tokens today with future repayment terms baked into a forward contract.
• Employee Compensation: Teams can offer tokens or stablecoins locked at current value, delivered after a vesting or milestone period.

4. Yield & Reward Optimization

• Yield Forwarding: Sell future staking, mining, or farming yields to get upfront liquidity.
• Restaking Liquidity: Trade restaked assets before restaking yields are realized.

5. Cross-Chain & Bridged Assets

• Pre-Bridging Trades: Agree to trade assets before they arrive on the destination chain, based on trustless bridging.
• BTC Forwards: Enable DeFi-native BTC trading by locking in BTC prices with off-chain or bridged BTC settlement.

6. Risk Management & Hedging

• Hedging Exposure: Lock in prices to protect portfolios from volatility.
• Inverse Products: Build synthetic shorts or downside protection via forwards instead of perpetuals.

7. Treasury & DAO Operations

• DAO Budgeting: DAOs can plan budgets by locking in future token sale prices in advance.
• Token Buybacks: DAOs commit to repurchase tokens at a set price and time via forward contracts.

8. Real-World & Tokenized Assets

• Real-World Assets (RWA): Sell tokenized RWA like real estate, art, or commodities with deferred delivery.
• Vesting Tokens: Trade locked tokens (e.g. team/VC allocations) without doxxing or upfront transfer.

These are straightforward use cases of forward contracts that can be seamlessly managed by this architecture. That leaves the door open to loads of innovations in Defi. Some of the above examples are in the roadmap for forwards development as built-in features.

Application Flows: Synch vs. Asynch

All applications have three step flow to handle user orders. These steps are:

1. Order Creation: users create orders to say what they want from the app.
2. Order Handling: The core functionality of the application lies in processing orders, and this step is what primarily sets different applications apart.
3. Delivery: The delivery to the user will be determined by their request and how it is addressed.

Forward Contracts are transforming the dynamics of financial flows by enabling applications to decouple delivery from execution. By disentangling execution from settlement while maintaining strong on-chain security, Forward Contracts effectively bridge the divide between DeFi and traditional finance. This innovation paves the way for a new era, empowering applications to develop diverse use cases that rely on asynchronous flows.

Let's explore a flow example to understand what happens when a use case is built upon Forward contracts.

Trading Fungible Assets with Builtin Trading Module

When a user places an order, the primary life cycle from initiation to settlement is illustrated in the diagram below:

As shown, here is the breakdown of the flow in forwards’s built-in modules.

Order Creation

The order(s) are successfully created with all user-specified terms. User also specifies the preferred matching method which will be used on Order Execution phase. These orders are stored within the trading module.

Order Execution

The main execution process of builtin trading module is to put all orders in auction or orderbook, based on user specified matching method. The matching engine finds the best matching order candidates from the orderbook. Matched orders are executed, prompting the contracts module to generate and sign a Forwards contract between counterparties based on the overlapping terms specified in the orders.

Delivery

As described above, the delivery phase of the application, in this case trading builtin module, will be done by Forwards contracts. This will enable decoupling the execution from delivery. The following steps are all handled by the contracts module.

1. Contract Creation

A contract is generated based on the specified terms outlined by the trading module. Once created, the contract is signed by both parties as directed by the trading module, rather than by the users themselves. After signing, the contract enters the "started" state, and NFTs are minted for both counterparties.

2. Delivery Period

The delivery can happen during a period called settlement period and was specified by the trading module when creating the contract. Settlement period can not be updated during the life time of the contract and specifies calendar start and end times that the settlement must happen during it.

The settlement can happen during the settlement period which is called an early settlement or it can occur a the end of settlement period.

3. Fulfillment

Regarding the counterparties’ decisions, three different situations can happen on fulfillment:

1. Successful Fulfillment: If both parties fulfill all their obligations, the process will be successfully completed, and the escrow will be released.
2. Partial Fulfillment: If either counterparty chooses to fulfill only part of their obligation (if agreed on the contract terms), the contract will be settled proportionally, and the party fulfilling partially will be penalized accordingly.
3. Default: If either counterparty fails to fulfill their obligation, they will be penalized, and the entire escrow amount will be forfeited and transferred to the other party. If the other party has activated the buy-in option, a buy-in auction will automatically be initiated to attempt to fulfill the position with another user. The forfeited escrow will then be transferred to the bidder of the buy-in auction.

Forwards V 1.0

The initial version of Forwards consolidates core concepts into practical, real-world use cases. Built on a Layer 1 blockchain using the Cosmos SDK, it supports the primary functionalities of Forwards applications through the following contract, with technical and product details available here: [LINK to OVERVIEW].

Current Functionalities Supported in This Version

Empowering Users and Market Makers

• Seamless Trades: Users can place market or limit orders for tokens and NFTs, sourcing liquidity from other blockchains and centralized exchanges (CEXs).
• Flexible Market Making: Market makers can participate without providing full upfront funding, enhancing liquidity and efficiency across both fungible and non-fungible assets.

Innovative Trade Execution Process

1. For Tokens:
   • A secure escrow system on the Forwards Hub ensures optimal market rates through competitive bidding by market makers.
   • Limit orders include detailed terms and collateral, initiating an auction mechanism where the best bid secures execution.
   • Coincidence of Wants: The platform smartly matches users based on mutual trade interests, maximizing execution satisfaction.
2. For NFTs:
   • Bartering System: Unique functionality allows users to trade NFTs directly for other NFTs or bundles of NFTs, bypassing the traditional requirement of using fungible assets.

Key Features

• Decentralized Clearing House: Facilitates secure and efficient trading across blockchains for both fungible and non-fungible assets.
• Escrow & Collateral System: Built-in safeguards ensure trust and reliability throughout the transaction lifecycle.
• Cross-Chain and Asset Compatibility: Seamless interaction across different blockchains and asset types enhances user flexibility and access.

Enhancing Physical Asset Trading

• By enabling direct NFT-for-NFT or multi-asset trades, the platform paves the way for physical asset representation and exchange on-chain, unlocking new liquidity channels and diverse trade opportunities.

You can find more details on forwards theory here: https://litepaper.forwards.zone