# Why CCPs? TLDR
CCP Multilateral compared to Billateral Contracts.
First self-custodial and anon global derivative financial market infrastructure handling counterparty risk.

For more : [Read Whitepaper](https://www.pioner.io/protocol-whitepaper-1)

### CCP Features
* Solve bilateral counterparty risk ( counterparty trust )
* Default loss risk mutualization
* Each defaulting CCPM ( CCP Member ) defaults losses is enssured.
* Each CCPM is incentivized to find liquidity to cut losses.
* Being a too big to fail entity sustaining market stability.
* Outside Bribing
* Outside Bailouts in the default case
* Anonymous counterparty trust
* Simplification : 1-counterparty only
* CCP is intermediary of all parties.
* Keeps and improves Bilateral derivatives efficiency
* Solve scale
* CCP networks are bound to <100 whitelisted parties
* Each bilateral parties increase exponentially the global risk of a CCP network.
* Model tested at large scale
* Each very large institution has been mandated to clear its OTC derivatives through a CCP since the 2008 crisis in all G20 countries.
* Decentralized automated CCP to allow smaller markets to benefit from market trust.

### Counterparty Trust usecases ( Trust = Economy Growth ):
* Netting
* up to 80% better efficiency
* DeFi back Derivatives
* Portfolio as Collateral
*
* SIMM
* Portfolio collateral requirements optimization
* up to 70% better efficiency
* Bring more investors
* Reduce market risk factors ( lower risk = bigger investors)
* Default waterfall risk = Less risk of market panic
* Counterparty default risk = Less risk of market panic
* Volatility ( Derivatives = More liquidity = Less volatility )
* Handle IRDs ( Interest Rates Derivatives )
* High Notional, low collateral requirements, high liquidity and expensive replacement cost.
* Millions of combinasons = needs dynamic pricing + cross parties netting.

### Modifications to transform bilateral contracts into CCPs
* Novation
* Default Waterfall Management
* Risk mutualization pool
* Optimistic Flash Withdraw Pool
* Frontend risk models
* Governance risk models
* MM bot risk models

### Avoiding RMP ( Risk Mutualization Pool ) Exploits :
* Acceptable Default
* CCP can default year 1, but on a 5 years horizon each CCPM are net positive.
* RMP is statistically priceable
* The CCP risk is quantifiable ( 1 counterparty )
* A Billateral Contract network risk is unknown ( n counterparties ).
* Adapt to market Risk
* ( Expected earnings / Expected Loss ) > 1.20 other 1 year at 99.5% change on bad scenarios.
* If < 1.20 -> Increase collateral requirements
* If >> 1.20 -> Decrease collateral requirements
* Decrease trading costs.
* CCP delta diversification

* Equal RMP contributions.
* Inducing risk on each members to force risk governance monitoring.
* Healthy risk consensus on market participants by incentives and coercion
* Wrong-Way Risk
* Concentration Risk
* Operational Risk
* Collateral Risk
* Model Risk
* Procyclacity Risk
* Long Tail Risk
* Back Testing, Stress Testing, Reverse Testing

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### A bilateral network and a CCP-cleared network
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### Efficiency comparisons with CCP Netting and CCP SIMM.