Derivatives have been around for hundreds and hundreds of years, where they were mainly used by farmers as a form of insurance for their crops.
In the past few decades, however, they've increasingly been used merely as a method of legalized gambling, where investment bankers place bets without having an ownership stake
in the underlying assets. That's largely what is problematic (though there's a bit more to it than that).
I explain it in detail here, pulling from dozens of sources.http://www.amazon.com/Too-Big-Has-Failed-Primer-ebook/dp/B00EYRUH76/ref=cm_cr_pr_product_top