BUIDLing with Opyn — DeFiDollar’s Opeth powering Stablecoin Loans

Wade Prospere
Apr 27 · 3 min read

Options are one of the most versatile financial instruments in DeFi.They allow traders to make money in virtually any market environment — bull, bear, or kangaroo. Yet given counterparty risk, most DeFi protocols require 100% collateralization of assets, leading to capital-inefficient markets.

At Opyn, we’re focused on building a flexible protocol that allows developers to create financial products that increase capital efficiency within DeFi. Using gamma protocol’s on-chain options infrastructure, anyone can combine any derivatives contract into a structured product for anyone else to consume.

DeFiDollar is one project improving capital efficiency of on-chain debt. Opeth is a synthetic instrument that combines put options and the underlying asset. This combo, put option + underlying asset, has a lower bound and can be used as collateral to issue stablecoins.

Opeth Use Cases:

Leveraged ETH Upside + Yield Farming

Reduce Downside Protection Cost

How Does Opeth Work?

  • The trader identifies available ETH puts on Opyn with a strike price of $800
  • The trader deposits 1ETH in the Opeth minting portal and pays the options premium to purchase the $800 strike put option
  • The trader can then borrow up to $800 of stablecoins from any protocol accepting the Opeth as collateral, valid until the option’s expiry.

What Happens at Expiry?

  • If at expiry ETH remains above $800, the user returns $800, takes their ETH back, due to the option expiring worthless (out of the money)
  • Option Expires In The Money
  • If at expiry the ETH price drops below the strike price ($800), then the put option is exercised to sell the underlying ETH for $800.
  • The protocol using Opeth as collateral will issue < $800 to keep a reasonable buffer

Opeth Advantages

  • Opeth opens up the market for broader collateral inclusion. Given physically-settled DeFi options settlement is guaranteed on-chain, even relatively illiquid assets can be used as collateral.
  • Flexible use cases for traders using DeFi options as party of their investment strategy

Notes

Opyn

Opyn is a capital efficient DeFi options protocol.

Opyn

Opyn is a capital efficient DeFi options protocol that allows users to buy, sell, and create options on ERC20s. Hedge, speculate, or earn yield at opyn.co

Wade Prospere

Written by

Opyn

Opyn is a capital efficient DeFi options protocol that allows users to buy, sell, and create options on ERC20s. Hedge, speculate, or earn yield at opyn.co

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