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Introducing LBT Lite (Beta) — Call Option on ETH

tl:dr; Today, we launched LBT Lite. LBT Lite is an ETH call option with the strike price equal to the ETH-USD price at the time the LBT Lite is written. Now, you can buy/sell LBT Lite with USDC.

Please read the note below before you start trying out LBT Lite.

Go To Apps: https://app.lien.finance

Note:

LBT Lite (Beta) is still in its testing phase and has not been audited in its current form.

LBT Lite contracts are based on code that have been audited in the past, with certain unnecessary elements removed from that audited code.

As a safety mechanism, we are restricting the holding of LBT Lite to 10 LBTs per address.

This limits the downside exposure of an account to around 200 USD.
(As mentioned above, LBT Lite is created as an at-the-money call option. This prices 1 LBT Lite at around 15 USD using current ETH prices, volatility, and interest rates.)

Furthermore, in the beta release, users will not be able to create LBT Lite. This functionality of creating options from ETH will be made available in the future. Users will be able to buy, sell, and exercise LBT Lite using the Lien app UI.

Call option on ETH. Less gas fees, more leverage.

As previously announced, we are currently working on major upgrades to the Lien smart contracts (Lien V2).

We are planning to release new and improved functions in stages over the course of 2–6 months.

As part of the transition from V1 to V2, we are introducing LBT Lite (Beta).

LBT Lite is a call option on ETH, with the strike price equal to the ETH-USD price at the time the LBT Lite is written (i.e. At The Money call option on ETH).

Are you bullish on ETH and want an easy but decentralized way to take leveraged long positions?

Now you can with LBT Lite!

What is LBT Lite in a nutshell?

Key points

  • LBT Lite is a call option on ETH.
  • LBT Lite is a European option; the option can be exercised upon expiration.
  • When the difference between the price of ETH-USD upon maturity of an LBT Lite and the strike price is positive, that difference will be paid out when the option is exercised (i.e. net-settlement). The user does not have to pay additional USDC to exercise their option as in Opyn,
  • LBT Lite has no margin calls or liquidations.
  • LBT Lite has no counterparty risk.
  • LBT Lite can be purchased with USDC.

LBT, or the Liquid Bond Token, is a token that is created by the Lien protocol by splitting, or tranching, ETH into two components, SBT (Solid Bond Token) and LBT.

The LBT is designed to absorb most of the volatility or the risk component of ETH.

As a result, the LBT becomes a supercharged, high risk, high return investment vehicle that does one thing very very well, and that is…

Go Long ETH, or to bet on the appreciation in the dollar price of ETH.

How does LBT Lite work?

The Lien protocol splits ETH into two derivatives, LBT and SBT.

With the original LBT, the SBT was used to mint iDOL utilizing its stable characteristics.

The strike price of LBT Lite is set higher than that of the original LBT, making the SBT unfit as collateral to back a stablecoin.

Therefore, iDOL cannot be minted from the SBT that is generated as a byproduct during the creation of LBT Lite

LBT is priced based on the Black Scholes model (BSM) using the following parameters:

  • Chanlink ETH-USD price
  • Annualized volatility based on the most recent 24 Chainlink ETH-USD price points
  • 0% risk free rate, considering the current low interest rate environment
  • 0% dividend yield

A 1–15% spread is added on top of the BSM price to cover the price fluctuations caused by front-running attempts. The spread is automatically adjusted based on volatility and strike price.

The price of LBT Lite is highly leveraged and will experience high price fluctuations which could be abused by front-runners, if not for the spread.

How is LBT Lite different from the original LBT?

LBT Lite shares the same innovative features of the original LBT.

The key difference is that LBT Lite has a higher strike price.

This means the following:

  1. LBT Lite will have higher leverage than the original LBT, which had around 2x leverage. This means more potential gains with the same amount of capital.
  2. The price of a single LBT Lite, or the option premium, will be lower than the original LBT. This means you can trade LBT Lite with less capital.

We also made improvements to FairSwap and now the gas fees are lower than ever.

Based on our calculations, gas fees for trading LBTs are expected to be 20% less than when trading on Uniswap.

What are the advantages of call options?

Leverage, leverage, leverage.

LBT and call options give one the ability to use leverage.

The ability to use leverage to multiply potential profits is a huge advantage that options offer over trading the actual asset itself.

Another powerful advantage of LBT and call options is that you won’t be wiped out of your position during flash crashes.

With other methods of margin trading, you have to worry about margin calls and liquidations during severe price swings.

With LBT, you can rest assured during volatile markets that your position is safe.

What are the advantages of purchasing LBT Lite on Lien?

LBT also has a clear advantage over options on traditional trading platforms.

With traditional trading platforms, one of the largest concerns is counterparty risk.

With Lien, there are no intermediaries.

There is no counter party.

Everything is done Peer-to-Contract.

Everything is on-chain.

When can I start using LBT Lite?

You can start adding LBT Lite to your crypto arsenal starting now!

The trading UI has just been released.

You will notice that it is simple to use and, as noted above, gas efficient than FairSwap V1.

Once we have had a chance to gather feedback from the users regarding their experience with LBT Lite, we will be adding more variations.

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