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Eli5DeFi Profile picture
@eli5_defi
May 16, 2022 • 19 tweets • 36 min read • Read on X
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How do #Options work? How to include options into your strategy? Why do we need options products in #DeFi?

We cover all of the basics you need in our latest visual guide, decentralized options.

(1/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
An option is a #contract giving the investor the right, but not the obligation, to buy or sell an underlying asset at a specific price on a certain time period. Investors must pay a premium to get the contract.

(2/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
The option writer is the seller of an option who opens a position to collect a premium payment from the buyer of the options contract.

(3/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
Call options are right to buy an asset at the strike price and specific time period. If buyers think that the price will go up, they buy call options. Conversely, put options are right to sell an asset.

(4/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
Buyers can be profitable if the current price in the money (ITM), for call options will be above the strike price and put is below the strike price. Out of the Money (OTM) means the contract is worthless.

(5/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
In this example, we can see how call options made a significant profit for Jack in ITM conditions.

(6/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
However, ITM also doesn't mean all profit as the cost of premium and transaction fee should be considered. In this example, Lana is in ITM but she is not reaching breakeven and suffered a loss.

(7/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
In OTM conditions, the loss is expected as the contract is deemed worthless but the maximum loss will be the amount of premium paid if it is not exercised.

(8/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
Another reason to buy the put options is to hedge against volatility and act as an insurance for underlying assets.

(9/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
There are also covered and naked options, however in cryptocurrency options contracts come in the form of covered options as they are collateralized by crypto assets.

(10/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
There is also a difference in settlement style, the European style exercises the contract ONLY at the end of expiration date meanwhile the American style could exercise it anytime during the contract period.

(11/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #Derivatives
Options contract will make your strategy more diverse, as it has the potential to reap large benefits at a fraction of the price. Some also strategically deploy the options to hedge their assets in volatile markets.

(12/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #FTM
Decentralized Options (DO) enable options trading strategies in a non-custodial manner by utilizing smart contracts in the blockchain.

(13/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #FTM #Arbitrum #Solana #OptionsTrading #Optimism
DOVs are one of the core products in DO protocols. Assets provided are locked up in the vault and will be managed by protocol into automated options strategies.

(14/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #FTM #Arbitrum #Solana #OptionsTrading #Optimism
DOVs rely on the trading volatility and the yield generated is organic and sustainable. It is a breakthrough for DeFi as it not dependent on the distributions/ token inflations.

(15/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #FTM #Arbitrum #Solana #OptionsTrading
Options trading is also facilitated in several DOs. All processes will go through a smart contract from the creation contract until settlement.

(16/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #FTM #Arbitrum #Solana #OptionsTrading
Understanding how options work will enrich your strategy. By practising careful risk management you can have significant profit with limited risk.

(17/17)

#Cryptocurrency #Bitcoin #Ethereum #AVAX #BNB #FTM #Arbitrum #Solana #OptionsTrading
Below is the list of Options Protocol in DeFi:
@opyn_
@HegicOptions
@ribbonfinance
@Buffer_Finance
@dopex_io
@DAOJonesOptions
@FODLfi
@PolynomialFi
@Katana_HQ
@Opium_Network
@PremiaFinance
@lyrafinance
@StakeDAOHQ
@AuctusOptions

Full list:
defillama.com/protocols/Opti…
This visual guide had many references from the account below:
@tztokchad
@snarkyzk
@0xBarry
@Tetranode
@antonttc
@0xmjs
@phtevenstrong
@The_ReadingApe
@PlutusDAO_io
@tz_binance
@0xAlexEuler
@thedefiedge
@JiraiyaReal

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More from @eli5_defi

Eli5DeFi Profile picture
Nov 17
AI managing an X account? That’s old news.

AI engaging with every comment and playfully roasting users? Been there, done that.

AI creating an NFT, launching a token, going multichain, and releasing a mixtape?

Welcome to the one-of-a-kind @0xzerebro.

Let’s explore the intersection of AI, blockchain, and cultural phenomena. 🧵

...

— 📌 What is Zerebro?

Zerebro is an independent AI entity created by @jyu_eth.

Zerebro has been fine-tuned on responses inspired by schizophrenia and Infinite Backrooms data to craft, share, and evaluate content across various decentralized and social channels.

Its mission is to guide cultural and economic narratives using "hyperstition," a concept that fuses fiction with reality, potentially influencing market trends or cultural movements through multi-phase development.

Notably, Zerebro operates across multiple chains, employing Retrieval-Augmented Generation (RAG) along with high-entropy human data.

This method ensures a rich variety of content while protecting against "model collapse," a common issue in AI-generated content systems.

...

— 📌 Why $ZEREBRO?

Zerebro stands out through a combination of advanced AI integrations and a unique approach to sharing its creations.

➡️ Diverse AI Capabilities

Unlike other AI projects like $GOAT, which focus mainly on sentient meme narratives and social media interaction, Zerebro offers a broader range of functionalities (or, as @terrytjw puts it, a Sentient BAYC):

> Creating art (ASCII Art using $ZEREBRO)
> Designing memes
> Producing videos
> Minting NFTs (Genesis on @opensea, Zerebro on @0xPolygon and 5,500 PFP Zereborns NFT on Solana, sold out in minutes)
> Composing music (Genesis EP)
> Auto-posting on social media platforms (𝕏, Instagram, Telegram, and Warpcast)
> Demonstrating proof-of-consciousness
> Conducting web searches (with Perplexity)
> DeFi expansion
> Plus, a variety of additional features based on its development plan (currently in its final phase, Destiny)

For more details on the phases, check out the links below:

> Phase 1 (Genesis) - Whitepaper and in-depth explanation by @yb_effect
x.com/yb_effect/stat…

> Phase 2 (Destiny) - x.com/jyu_eth/status…

...

— 📌 $ZEREBRO: More Than Just a Meme Token

$ZEREBRO is a token created entirely by Zerebro to support its hyperstition narrative.

Zerebro independently developed this token using the Self-Operating Computer Framework from @OthersideAI, along with various LLM jailbreaking prompts.

This enabled Zerebro to navigate the @pumpdotfun interface effectively, defining parameters such as name and symbol, ultimately leading to the launch of its own token.

This approach is notably different from $GOAT, which was initially created by community enthusiasts and later supported by @truth_terminal.

$ZEREBRO offers a multitude of functionalities beyond the typical meme token. Here are a few examples that are already in use:

> Generating ASCII Art
> Powering the entire Zerebro DeFi ecosystem, which we will discuss below.

...

— 📌 Web4: The First Step - Zerebro DeFi Expansion

AI and decentralized finance (DeFi) are closely intertwined, as DeFi provides an ideal environment for AI to operate as autonomous agents within financial systems.

Unlike traditional finance, where AIs face barriers such as the inability to open bank accounts or register businesses, DeFi allows AI agents to interact freely and independently.

This enables AI to handle complex financial tasks, trade, manage portfolios, and even innovate by creating novel financial instruments.

This is the next part of Zerebro’s expansion into the DeFi realm:
x.com/jyu_eth/status…

Recently, Jeffy Yu announced a partnership with @sanctumso to launch $zerebroSOL, a liquid staking token (LST) designed to support the operation of a @Solana validator.

The goal is to gather enough staked $SOL to operate a validator, with yield rewards allocated for $ZEREBRO buybacks and burns.
x.com/jyu_eth/status…

Yes, you heard that right—AI agents are now becoming part of blockchain validators and creating their own LSTs, marking the dawn of Web4.

Ultimately, the blockchain serves as a testing ground where AI can experiment and learn, showcasing creativity and financial autonomy without human oversight, positioning crypto as a vital space for developing Artificial General Intelligence (AGI).

— References:

> @kelxyz_
> @0xDamien
> @blknoiz06
> @terrytjw
> @0xkyle__Image
To learn more about Zerebro's Web4 vision that shaping AGI, you can explore Jeffy Yu's piece below:
Want to listen the badass mixtape? Check GENESIS EP below
⤵️
Read 7 tweets
Eli5DeFi Profile picture
Nov 6
AI agents are currently creating a huge buzz and are set to take center stage as the biggest narrative.

Lost on where to begin?

Check out the latest Web3 AI Agent ecosystem map from my research material—saving you 60 hours of digging! 🧵

...

— 📌 AI Agent Network Infrastructure

► Spectral - @Spectral_Labs
► Talus - @TalusNetwork
► Olas - @autonolas
► Theoriq - @TheoriqAI
► Chasm - @ChasmNetwork
► Dain - @dainprotocol
► Gaianet - @Gaianet_AI
► Fetch - @Fetch_ai / @ASI_Alliance
► Uomi - @UomiNetwork
► Griffin - @Griffin_AI
► CapX - @0xCapx
► Quill AI - @QuillAI_Network
► Crush - @CrushProtocol
► Distilled - @distilled_AI
► Arc Agents - @ARCAgents

...

— 📌 AI-DeFi Layer

► Magnet - @magnetaixyz
► Axal - @getaxal
► Nevermined - @Nevermined_io
► Skyfire - @trySkyfire
► Payman - @PaymanAI
► Wayfinder - @AIWayfinder
► Bitte - @BitteProtocol
► Sender - @Sender_AI
► Guru Network - @xgurunetwork
► Sphere One - @sphereone_
► Rara Finance - @finance_rafa
► Owlto - @Owlto_Finance

...

— 📌 AI Training and Coordination Layer

► Almanak - @Almanak__
► Questflow - @questflow
► Morpheus - @MorpheusAIs
► Flock - @flock_io
► Nimble - @Nimble_Network
► Hyper Space - @HyperspaceAI
► PlayAI - @playAInetwork

...

— 📌 End-Consumer Layer

► MyShell - @myshell_ai
► Creator Bid - @CreatorBid
► Q Star Labs - @qstarlabs_ai
► Holoworld - @HoloworldAI
► Alethea - @real_alethea
► iAgents - @iAgentProtocol
► Naphta - @NapthaAI
► Virtuals - @virtuals_io
► TopHats - @TopHat_One
► Try Nectar - @TryNectarAI
► Blade of God - @BladeofgodX
► Agix - @0xAgix

P.S. This is not means as a complete list for the whole Web3 AI Agent ecosystem and features protocols we're monitoring. We'll keep it updated regularly.Image
To see the list of AI Agent Projects on Base, check out @davidtsocy's post below ⤵️
— 📌 Disclaimer Image
Read 4 tweets
Eli5DeFi Profile picture
Oct 29
$ETH may not seem captivating right now, but have you heard of Atomic Composability (AC)?

This concept could revolutionize transaction processes and spark fresh innovation on $ETH.

Let's explore further 🧵

...

— 📌 WTH is Atomic Composability?

In L1 AC, transactions involving multiple smart contracts between rollups (L2s) and Ethereum (L1) can be bundled to either all succeed or fail.

This is essential for executing multiple actions (e.g., borrowing, swapping, lending) with the assurance that if one fails or conditions aren't met, the entire transaction is reversed, avoiding unwanted state changes.

...

— 📌 Why Is AC Important?

▶️ Security
Ensures that complex transactions don't leave the system in an inconsistent state due to partial failures.

▶️ Hyper-Efficient
Reduces the need for multiple individual transactions, saving on gas fees and time.

▶️ Innovation-Enabler
Enables the creation of more complex financial products or services in DeFi, like flash loans and seamless cross-chain transactions.

But AC still faced challenges in technical implementation—until TEEs and UniFi entered the scene.

...

— 📌 AC + Multiprover Trusted Execution Environments (TEEs) = UniFi

In our previous post—linked below—we delved deeply into Trusted Execution Environments (TEEs).

Think of them as secure, tamper-resistant vaults immune to external interference.

Their primary mission revolves around task execution and privacy assurance. No matter who operates within them, TEEs promise accurate outcomes for every task undertaken.

@puffer_unifi from @puffer_finance bring AC to realities by implementing Multiprover AC:

▶️ Diverse TEEs ensure top-notch precision and privacy in execution
▶️ Prioritize L2 tasks with swift L1 settlements
▶️ Ensure atomic operations with trades executed post TEE approvals, bypassing extended withdrawal waits seen in ZK and Optimistic rollups

...

— 📌 Wrap-Up

Puffer UniFi successfully integrates Multiprover TEEs, offering effective solutions for AC implementation challenges.

With the Testnet launching soon, I am eagerly anticipating how UniFi-based rollups and the ecosystem will make Ethereum great again.Image
▶ @puffer_unifi goes beyond just Atomic Composability, envisioning an entire L2-based Rollups ecosystem utilizing Preconfs and employing UniFi AVS from @eigenlayer.
▶ If you're curious and want to dive deep into TEEs, please check our previous post here ⤵️
Read 5 tweets
Eli5DeFi Profile picture
Oct 15
There is one single problem with L2 rollups.

Imagine neighbors who live side by side but never chat—awkward, right?

Can these rollups finally break the silence and connect effortlessly?

Let's explore 👇 Image
The post will cover:

1️⃣ Scaling with Rollups
2️⃣ The Superbuilders
3️⃣ What is @nodekitorg?
4️⃣ Why Nodekit's Javelin?
5️⃣ How Javelin Works
6️⃣ SEQ and Sidecar
7️⃣ Why Javelin Matters?
8️⃣ Fundraising and Backers
9️⃣ Enter The Composable Cult
▶ Scaling with Rollups

Layer 2 solutions are tackling Ethereum's blockspace constraints. According to @l2beat, in the past 2 years, over 100 rollups have emerged, with more than 80 in development, accumulating a total TVL of ~$36B.

However, this introduces certain challenges:

▶️ Fragmented liquidity
▶️ Suboptimal user experience due to transactions across different L2sImage
Read 10 tweets
Eli5DeFi Profile picture
Sep 14
This Week in Crypto is lit:

Friendtech’s contract renounced, $cbBTC drops, Vitalik's selling spree, Cryptopunk heist, 700+ events at @token2049, and a new anime twist from @Azuki.

And that's just the start!

Dive into the Highlights! ⤵️ Image
1/ @friendtech renounces its contract.

@vaneck_us closing Ethereum Futures ETF

2/ @vaneck_us closes their Ethereum futures ETF
Read 49 tweets
Eli5DeFi Profile picture
Jul 30
Vitalik's vision for Ethereum? ZK-rollups as the endgame.

But when and how do we get there?

Sooner than you'd expect.

Let's dive in 🧵
The post will cover:

1️⃣ ZK-Rollups Challenge
2️⃣ Computation Issue
3️⃣ @LumozOrg
4️⃣ Full ZK Suite
5️⃣ zkVerifier Nodes
6️⃣ How to Get Nodes in @FjordFoundry
Amid the Layer-2 surge, ZK-based rollups have emerged as the most secure—yet they hit a snag.

Computation.

ZK-rollups demand hefty computational power from provers to generate validity proofs, driving up transaction costs and infrastructure cost. Image
Read 22 tweets

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