Thread by @1sat1c

Options, TVL and their relationship:👇🏻

An unspoken secret in the space is TVL is a 2 edged sword. Many protocols attract TVL via offering high native token rewards. What typically happens is the TVL arrives, stays as long as the high rewards r distributed, then leaves while dumping the token, headed 4 the next stop.

Because of the unique function options serve in a portfolio, balance sheet, P&L, CF compared to any other form of investment (Capex, equity, royalty, intangible), TVL captured on an options platform tends to be much more sticky.

Options are used by a myriad of players . In fact, the variety of financial players using options exceeds any other financial form, including debt.

Private investors use options to speculate and for leverage, corporations use options to hedge, speculators use options to both juice returns and hedge, funds use options to spice up returns and hedge.

The beauty of it is, contrary to any other form of financial investment, the use of options and other derivatives is typically encouraged, rather than licensed or prohibited, by tradfi governance institutions.

No BoD ever asked a CEO why did he hedge the company’s exposure to oil, Lumber, gas or any other input. Even if it turns out the hedge wasn’t necessary, the hedging action itself is deemed prudent. Always.

Which is why option related TVL will be larger, and less volatile, than any other form of financial exposure. In Tradfi, derivative global notional value is in the quadrillions, and is so large there are 2 indisputable facts regarding it:

1. It dwarfs any other financial instrument and in fact is worth more than all the rest combined (debt 300T, equity 115T, RE 280T).

2. No one knows what the actual number is at any given time, as it’s so popular, so commonly used, by so many different actors, is global, and via its nature is a derivative of other assets’ prices.

Because of the variety of uses options serve for any actor with financial exposure, one week to boost returns, the next to hedge, the third to balance portfolio, the FREQUENCY of option utilisation is high. Higher than any other instrument.

Hence, removing TVL from an option platform is imprudent. It’s easy to remove TVL from a platform one uses rarely. When the usage is high, when the frequency is high, when the need may manifest itself at any time, when utilisation is an ongoing process…

removing TVL is counterproductive, and non practical. Hence, TVL captured by an options platform like @dopex_io , is not equal to TVL on a random platform. It’s premium TVL, b/c it’s much less likely to be moved off the platform.

In addition, an option platform is COMPLIMENTARY to all The other Defi products out there. It isn’t cannibalising anything, in fact it’s existence stabilises and contributes to the proposition of any project with a product represented on Dopex,

…so an actor is incentivised to maintain his TVL on an option platform in parallel to any TVL he locks on other platforms.

On the speculative side, options provide the ability to make up returns fast, high capital efficiency (you don’t need to use/risk much to make a lot), the benefits of high leverage without the downside

and hence a sophisticated, thought out, built for purpose, elastic, decentralised option platform like Dopex is primed to attract, over time, a disproportionate amount of TVL.

So Dopex is primed not only to attract a huge TVL, but is also built to maintain it, and grow it over time as defi expands.

This is another reason Dopex is one of, if not the most important protocol on defi today: largest TAM+brilliant game theory+careful, accurate design+strong leadership+fitting tokenomics+built in structural advantages over the entire market.