Editing Financial derivatives (section)

== Pure options ==
One of the advantages of traditional derivatives is that the underlying asset does not need to be purchased – your actual assets do not need to be encumbered in the contract if your promise to fulfill your bargain is reliable. The market relies on the reputation of its participants and the insurance that the market maker provides. This cannot be done for pseudonymous participants in an empty coding environment, without encumbering underlying assets. However, with REP tokens, we can build a history of good behavior that is valuable and will give the proper incentives for participants to honor contracts. This can be done with a more complex system of accounting for reputation. We can [[Decentralized underwriting|underwrite]] the reputation of the market.