Opium Protocol 2022 updates
LARGE PROTOCOL UPDATE: BUILDING ON THE BEAR MARKET
-Please carefully read the disclaimer below-
2022 Summary:
- The Opium Protocol has seen a staggering 500 million USD in traded notional in the past year;
- The highly-anticipated Opium v2 was successfully launched on Arbitrum and Polygon, bringing even more functionality and flexibility for market making and arbitrage;
- The protocol boasts a custom derivative constructor for altcoin and exotic options or futures, allowing for an unprecedented level of customisation;
- Decentralised Order Books, built on the cutting-edge 1inch Limit Order Protocol and integrated with 1inch pathfinder, provide unparalleled efficiency and security;
- The release of RFQ system v1.0 brings support for protocol-agnostic DeFi options, further expanding the possibilities of the protocol;
- The protocol agnostic Dutch auctions feature, enables both users and third party smart contracts to launch auctions in order to get fair price;
- The Web3 ID protocol, known as “Know Your Cat” (KYC) was also launched and released, adding an extra layer of security and compliance to the platform.
Looking behind
As we reflect on the past year, we are filled with gratitude for the dedication and passion of our community. From the countless hours spent on calls and chats, to the tireless contributions on Github, you have been the driving force behind our progress and success.
It is with great excitement that we share with you some of the highlights from the past year. We have seen numerous deployments and achieved many milestones that we are proud to share. We hope that you will join us in celebrating these accomplishments and look forward to continued growth and success in the coming year.
The Opium protocol is a part of innovation in the DeFi space, offering a sophisticated settlement protocol for derivatives that is now branching out to include the vital aspect of regulation-friendly infrastructure (RegFi). As the industry matures, it is becoming increasingly clear that all DeFi projects must pay heed to regulatory concerns to reach their full potential. The Opium team, along with its dedicated community and contributors, is taking this challenge head-on by building open infrastructure that makes it simple for other projects to harness the power of the protocol.
The past year has seen the unveiling of the second version of the Opium Protocol, a marvel of engineering that is more efficient, faster, and more cost-effective than ever before. Deployed on the Arbitrum and Polygon blockchains, this iteration of the protocol enables the effortless creation of custom decentralized derivatives. This is a monumental achievement that allows for the launch of Dutch auctions and automated strategies that are updated with the latest v2.0 features. With this update, any smart contract or Dapp can now launch a Dutch auction with the goal of buying or selling specific options, futures, or other tokens via a mechanism that is not only price efficient but also gas efficient. This ensures that any smart contract can now buy or sell specific tokens, such as call options, with the assurance that the price will be fair. This is because, not only are market makers participating in the auction, but 1inch routers and arbitrageurs are also taking part.
The Opium Automatic Strategies have also undergone a dramatic improvement, now supporting custom logic for trading on spot or derivatives crypto markets. Thanks to a better architecture and the use of Gnosis Safe as a core module, they have become incredibly flexible in terms of strategy. Anyone can now deploy and own an Automated Strategy and instantly take advantage of the Opium infrastructure, such as liquidity from market makers and other RegFi ecosystem and custom products that are created on Opium. This is the result of tireless efforts of our team and community, and it is a testament to the power of collaboration and innovation.
Lets dive into details…
Looking Towards RegFi
Decentralized derivatives, despite their potential, have yet to see widespread adoption and demand. Some have attributed this to the prevalence of wash trading on semi-centralized exchanges, farming-driven liquidity, and whales paying fees to protocols in exchange for tokens.
“DeFi and RegFi are not adversaries, they are allies that enhance and support each other in a harmonious union”, Andrey Belyakov
However, as the DeFi space matures, many experts predict that this will change. As the need for options, interest rate swaps, and futures arises from mature ecosystems where individuals and institutions consider not only initial growth but also hedging and taking specific risks, DeFi derivatives are expected to gain traction. This pattern is reminiscent of what happened in the spot market: first, the development of a centralized market, then the emergence of DeFi, enabled by arbitrage — think of Uniswap’s development. We are now at a stage where centralised derivative exchanges are seeing increased adoption, and the system is ready for DeFi equivalents to thrive.
While decentralized finance holds great promise, the traditional financial system still dwarfs it in size and scope. The true potential for growth lies in attracting demand from the traditional side, and we see that institutions are eager to participate. However, they are waiting for clear regulatory frameworks to be put in place. Paradoxically, events such as the collapse of FTX will likely lead to increased regulation for centralized exchanges, which in turn will drive more adoption of DeFi. This is because, for many, DeFi is cheaper, easier, and sometimes even faster than centralized finance, and it is definitely much more transparent and auditable.
The Opium Team is actively working with a few institutional players to develop a transparent and compliant framework for RegFi that will still utilize the Opium Protocol, but in a compliant manner. Stay tuned for more information on this exciting development.
Opium Protocol 2.0
It has been an honor to bring the Opium 2.0 protocol to fruition, following rigorous testing and review by independent auditors. The new version of the protocol boasts a number of exciting features and improvements, including:
- Unique ID for Long and Short positions, which can be redeemed or minted at any time in a 1:1 proportion with the corresponding collateral;
- Significantly reduced gas costs;
- Increased customisation options for products;
- Enhanced efficiency for arbitrageurs;
- Gas-less permissions for position holders;
- More decentralised governance system and flexible oracle design;
The deployment of the new version was done on the Arbitrum mainnet, and the community is already actively building on top of it. Recently Polygon deployment was also done. Migration tools will be likely offered for those who wish to transition from v1.0 to v2.0. However, Opium v1.0 will remain operational as long as Ethereum exists and there are users of it, as it is an immutable set of smart contracts.
For more information, please read the technical article.
Trustless DeFi infrastructure
Opium v2.0 boasts a trustless infrastructure that seamlessly connects different components of the protocol, as well as linking the protocol to other protocols and DeFi “legos.” In addition to the protocol, a suite of features were conceptualized, developed and implemented in the year 2022, such as:
- a limit order protocol for Opium positions with a distinct trading view;
- an enhanced version of the Opium position explorer;
- a Request for Quote (RFQ) system protocol for multi-swaps (all or nothing) and clearing of various positions (protocol agnostic);
- Dutch auctions that can be launched by both users and smart contracts;
- API and SDK resources, improved documentation to promote community involvement;
- and a web3 based Know Your Customer (Know Your Cat) platform that may grants access to users based on their wallets and verifications on other platforms, which was crafted in collaboration with Binance team and utilizing Binance’s own KYC system.
In the realm of DeFi, we firmly believe that the composability of protocols and ecosystems is one of the key advantages and infrastructure trend is one of the most important trends along with RegFi direction.
Introducing ‘Know Your Cat” ID (web3 KYC analogue)
Opium Team is launching KnowYourCat.id, which connects various data sources to create reliable “compliance whitelists.” This allows projects (including the Opium itself) to easily receive information, such as “non-US person,” with a certainty or probability, through both API and on-chain methods. In order to growth and mass adoption, it is important for creating compliant DeFi products. Few projects are currently building on top of the KnowYourCat and will only work with compliant DeFi pools. Projects like RealT.co already announced integrating KnowYourCat technology.
CATegories — converting traits into an access token
Your token, bound to the Cheshire Cat, holds a wealth of information and characteristics, yet it is particularly intriguing how it categorizes you. According to specific rules for each category, you may fall into it if you possess certain traits or a trait combination. For instance, if you possess a verified Know Your Customer proof (one of many) that is only accessible to non-US individuals, you may be placed in the “non-US” category. In this example, the Cat analyses dozens of KYC proofs on the blockchain and assigns you to the appropriate category if even one trait is present. These categories and their rules can be easily created by anyone, allowing projects to establish their own categorization and define the criteria for inclusion.
Once an address has a category, it also holds a Non-Fungible Token (NFT) access token on its balance, you possess such a token only if you meet the qualifications and possess the corresponding set of traits. These access tokens are utilized for logging into decentralized apps, gaining access to smart contracts or private liquidity pools, private environments, protocols and tokens. A prime example is whitelisted DeFi product that is open for anyone who holds one of several trusted KYC verifications. Another example is whitelisted DeFi product or voting for anyone in the “human” category.
The Cat holds great potential, but it is important to note that it is not a conventional KYC and does not serve as a replacement for it in any way. However, it is a fascinating concept for how KYC may evolve in the future. Imagine not having to submit a photo of your passport to untrusted exchanges, where they could potentially sell your data on the black market, but rather presenting a zero-knowledge proof that you are a Dutch citizen. Such a proof confirms that you possess a government digital ID without disclosing any personal information.
We believe in web3 id and that it can bring compliant and convenient tools without lose of privacy.
Dutch Auctions v2.0
It becomes effortless to tap into the bountiful resources of the Opium ecosystem, such as liquidity and Dutch auctions 2.0, which are expertly managed by professional market makers. Dutch auctions v2.0 will provide a more fair and transparent method of obtaining liquidity and they are integrated with 1inch pathfinder. That will ensure that there is a maximum number of liquidity sources that can “participate” in the auction. Together, we are creating a brighter future for the DeFi space.
Automated Strategies 2.0
For nigh on two years now, the Opium community has been designing and implementing automated strategy staking pools, a concept that is both elegant and straightforward. The idea is to allow token holders to stake their assets within the pool and have a pre-programmed strategy, such as the selling of call options on a weekly basis, executed on their behalf. These strategies have proven to be quite successful, in part due to the community’s focus on lower risk profiles compared to their competitors. However, there were calls to improve the architecture and modules of these staking pools to make them even more flexible. As a result, Automated Strategies 2.0 were brought to life, audited, and deployed.
Built on the solid foundation of the Gnosis Safe core and custom Opium modules that manage the safe, these new strategies offer unparalleled flexibility and security. The modules are responsible for executing strategies, accounting, and ensuring safe execution, to name a few. With this architecture, one can design covered call strategies that collect premium in DAI/USDT while keeping the main token balance stable, or the pool can automatically provide liquidity to Uniswap v3 within a desired range for any unused funds. The possibilities are endless within the Opium ecosystem, where custom instruments and market-making auctions are available to those looking to build their own strategies and take advantage of the infrastructure.
Here is some GitHub implementations:
Community and developers
The Opium Community continues to flourish and attract the finest financial and technical minds, as well as teams who are tirelessly developing and exploring the possibilities of the protocol. If you seek to be part of a decentralized collective of innovators, create your own DeFi visions and tools, reach out to us through Telegram, Twitter, or our web forum.
About Opium Protocol
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*** Subject to Terms and Conditions *** not financial advise and prohibited for some jurisdictions, including United States of America and Japan***
Opium provides innovative, cutting-edge technology that is yet to be proved by time. As a beta version of a new financial system, the Opium protocol serves primarily the community of experienced DeFi professionals, who are able to evaluate associated risks, including, but not limited to, the technical failure and permanent capital loss.
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