A thread on @opyn_ 👇
Opyn is a smart contract based insurance platform built on the Convexity Protocol.
TLDR; Opyn provides a well-needed and extensive insurance solution for the quickly growing DeFi ecosystem.
1/x
Opyn is a smart contract based insurance platform built on the Convexity Protocol.
TLDR; Opyn provides a well-needed and extensive insurance solution for the quickly growing DeFi ecosystem.
1/x
What problem is Opyn solving?
As the DeFi space grows, it is clear that better insurance coverage is needed.
DeFi insurance solutions should consider all possible attack vectors: technical, financial and admin.
Opyn’s options-based insurance does that.
2/x
As the DeFi space grows, it is clear that better insurance coverage is needed.
DeFi insurance solutions should consider all possible attack vectors: technical, financial and admin.
Opyn’s options-based insurance does that.
2/x
How does Opyn provide DeFi users access to insurance?
Opyn has built an insurance platform on top of a generalized (supports both put and call) options protocol called Convexity.
Opyn’s insurance is based on the use of protective put option strategies.
3/x
Opyn has built an insurance platform on top of a generalized (supports both put and call) options protocol called Convexity.
Opyn’s insurance is based on the use of protective put option strategies.
3/x
Why is now the time for DeFi insurance?
To date, a non-trivial amount of ETH ($1 billion) has been locked in different DeFi protocols.
In anticipation of future growth, both builders and investors require insurance to provide security against hacks and liquidity crises.
4/x
To date, a non-trivial amount of ETH ($1 billion) has been locked in different DeFi protocols.
In anticipation of future growth, both builders and investors require insurance to provide security against hacks and liquidity crises.
4/x
How big is the market for options trading?
In traditional finance, options have an annual exchange volume of more than $635 trillion (excluding OTC trades).
There’s plenty of room for growth.
5/x
In traditional finance, options have an annual exchange volume of more than $635 trillion (excluding OTC trades).
There’s plenty of room for growth.
5/x
Who are Opyn’s competitors?
To date, mutual-style (e.g. Nexus Mutual) insurance.
Problem: mutuals have complicated governance re the payouts of insurance claims.
Options-based insurance provides cover regardless of the reason, if the price of the insured asset drops.
6/x
To date, mutual-style (e.g. Nexus Mutual) insurance.
Problem: mutuals have complicated governance re the payouts of insurance claims.
Options-based insurance provides cover regardless of the reason, if the price of the insured asset drops.
6/x
What are initial use cases for Opyn’s insurance?
Insurance for DAI and USDC deposits on @compoundfinance. Opyn recently added support for ETH.
Future:
New collateral types; ERC-20 tokens, interest-bearing assets to minimize the opportunity cost for option sellers, etc.
7/x
Insurance for DAI and USDC deposits on @compoundfinance. Opyn recently added support for ETH.
Future:
New collateral types; ERC-20 tokens, interest-bearing assets to minimize the opportunity cost for option sellers, etc.
7/x
How do you insure e.g. DAI?
Assume someone wants to buy (option buyer) and sell (option seller) insurance against the value depreciation of DAI.
8/x
Assume someone wants to buy (option buyer) and sell (option seller) insurance against the value depreciation of DAI.
8/x
The option seller locks up ETH in a vault to mint option tokens (oTokens).
Then, the option seller defines the parameters for the oTokens.
oTokens with same parameters make up a fungible oToken series, which aggregates liquidity as more similar oTokens are minted.
9/x
Then, the option seller defines the parameters for the oTokens.
oTokens with same parameters make up a fungible oToken series, which aggregates liquidity as more similar oTokens are minted.
9/x
Once oTokens have been minted, the option seller can sell them on the open market to obtain premiums.
Their prices serve as on-chain oracles for volatility & risk in DeFi.
For example, a price increase for a protective put on DAI may indicate a vulnerability in MakerDAO.
10/x
Their prices serve as on-chain oracles for volatility & risk in DeFi.
For example, a price increase for a protective put on DAI may indicate a vulnerability in MakerDAO.
10/x
DAI:USDC put option buyer can sell DAI for $0.99 USDC until the oTokens expire.
If the value of DAI drops below $0.99 USDC → oTokens become valuable for the buyer.
Profit: $0.99 USDCI - price of DAI * # of oTokens.
Profit is paid from option seller’s collateral.
11/x
If the value of DAI drops below $0.99 USDC → oTokens become valuable for the buyer.
Profit: $0.99 USDCI - price of DAI * # of oTokens.
Profit is paid from option seller’s collateral.
11/x
How is Opyn governed?
Opyn is currently owned and administered by core team & early investors.
Admins update oToken parameters, manage whitelist of oTokens and set names/symbols for oTokens -- protocol is noncustodial.
No native token, yet.
12/x
Opyn is currently owned and administered by core team & early investors.
Admins update oToken parameters, manage whitelist of oTokens and set names/symbols for oTokens -- protocol is noncustodial.
No native token, yet.
12/x
Path to decentralization:
Opyn -- or the underlying Convexity Protocol -- should eventually move to community-governance à la @compoundfinance.
Eventually, the owners should want to find a way to distribute a part of the insurance premiums to Opyn tokenholders.
13/13
Opyn -- or the underlying Convexity Protocol -- should eventually move to community-governance à la @compoundfinance.
Eventually, the owners should want to find a way to distribute a part of the insurance premiums to Opyn tokenholders.
13/13
