FinNexus Weekly-chat recap 23/06/2020 & 30/06/2020
Weekly-Chat Recap: 23/06/2020
Participants:
Boris Yang — FinNexus Founder & CEO
Ryan Tian — FinNexus Financial Specialist
Discussion:
Ryan Tian: A lot has happened in the last few weeks in DeFi.
Sarah: I know you guys have been very busy recently, preparing more informative content for FinNexus community.
Ryan Tian: True, we did lots of research and development on DeFi and options.
Sarah: A couple of things are getting a lot of attention in mid-June. I’d like to know your thoughts on COMP Listing on Uniswap that has gone up 450% last week. Do you think DeFi will be a trend in the second half of 2020?
Ryan Tian: Yes, last week in DeFi is all about Farming.
Boris Yang: DeFi is almost the only case launchable now in blockchain industry. It attracted lot of money and attention now.
Ryan Tian: COMP token is just a governance token, without direct benefits from the returns of the Compound platform, but it got most of the attentions and the price went to the moon last week.
Question 1:
Boris Yang: Ryan could you share something about Farming in DeFi? I will be sharing the plans for our options platform.
Ryan Tian: Well, it is just a funny way to call it. The chains have mining and DeFi has Farming :) Actually, it is not a new word, as some centralized exchanges did that before, called the transaction rewards. But COMPOUND is becoming the new DeFi king with it.
Question 2:
Naruto Izumaki: How does token burn work? How many percentage of tokens get burned per day? I’m new to this project!
Ryan Tian: The FNX tokens are converted into UM1S, a token with returns backed by real world asset, and the converted FNX tokens are burnt.
You just send the FNX tokens to the UM1S SMC and the conversion and burnt process will be done in 24 hours.
Question 3:
Sarah: What do you think about the liquidity mining and the compound lending mining?
Ryan Tian: Compound has a solid foundation and has been a star in DeFi for over 2 years, just after Maker. I think there are several reasons for the rapid growth last week:
1. Deep and comprehensive involvement in borrowing and lending protocols;
2. Dynamic and automatic interest model;
3. Initial Uniswap Offering of COMP tokens;
4. Massive increase of USDT supply and the first deep engagment in DeFi;
5. Massive movement of CeFi to DeFi
Boris Yang: Incentive for transaction is a good design. In the centralized exchanges they did not design it well. Most users made transactions to gain rewards and sell quickly. It hurts the economics system finally. How about compound?
Ryan Tian: Liquidity mining is mainly operated by some central exchanges to boost the liquidity. Well DeFi farming is the token distribution involvement of the relating protocols. They share some resemblances.
Ryan Tian: Well, we will have our own farming schemes after the launch of the options model. The collateralized tokens will be rewarded with further incentives, as percentage to the transactions and premiums of the options products.
Question 4:
Serg: Will the UM1S somehow be reflected in the FNX charts on CMC?
Ryan Tian: No, UM1S is just our product and will not be listed anywhere. The duration of the token is 3 months since listing and will disappear upon maturity.
Sarah: We will be releasing lot of important information about our options product soon.
Serg: That would be great!
Ryan Tian: The prototypes of the option products are ready for testing next week, just as we planned.
We are working on a very comprehensive post on comparison of Decentralized options platforms. We would be the start.
Link: https://medium.com/coinmonks/a-comparison-of-decentralized-options-platforms-140b1421c71c
Sarah: Heard that the leading DeFi options platform OPYN just completed $2.16M Funding.
Ryan Tian: Right, they are the biggest now, but still quite small compared with the whole market and other big DeFi projects. LOOOTS of potential in this market.
We are super excited about it and have full confidence that it will be a hit
Serg: Also on ETH?
Boris Yang: Yes on Ethereum.
We are working on FNX options platform including coding and marketing plan. FNX options designed a lots of functions better than OPYN.
Sarah: could you elaborate on that before releasing the comparison article?
Ryan Tian: I’ll start with the cash settlement and margin model.
OPYN right now needs full collateral in order to be an option writer or seller.
E.g., to sell one put option with strike price of 250, you have to deposit 1 250USD as collateral, and the premium may only be 2USD. It is not so economic friendly to the sellers. As long as we keep the collateral or margin sufficient to balance the difference when excising, then it will be enough. Therefore, FinNexus will have a dynamic margin model, to boost the leverage and monetary efficiency to the sellers.
Boris Yang: FNX options is more open to users to join the options writing and close the position.
Question 5:
Felipe: We have two consecutive days that there was no conversion. There is the possibility of placing the conversion within Bitrue and Bkex to facilitate and further expose this option to the FNX holder. And I see that many entered the community wanting to speak with the administrators to list FNX in other Exchanges. Will we have more Exchanges in June or July?
Boris Yang: We are working on it.
And we will update new information as soon as a deal is done. In the next two weeks we will be releasing the Beta version for options and then the next version will have fulll functions and farming. We want to list the next exchange along options platform release. FNX has real use case and listing at the same time will have more impact on price and value.
Ryan Tian: Well, it is totally the choice of the FNX holders to hold or convert. Because FNX tokens are converted through smart contracts, it should be done by sending the tokens from your own wallet address.
Question 6:
Serg: What do you mean by farming?
Ryan Tian: It is a way to incentivize the participants on the platforms. You know $COMP tokens from compound last week? And also $SNX and $REN.
Serg: Yes, I’ve heard about them.
That is why Compound is sitting on the throne now!
Question 7:
Serg: Is it better than MakerDao? Why is it in the first place?
Ryan Tian: Well it is different. Compound is distributing COMP for free for the users according to the borrowing and lending interest. The USDT deposit and lending rate went crazy. Lots of CeFi money from exchanges went into compound for yield farming. And the COMP price went to over $300 per token.
Have you checked the yield on Curve Pools? It goes to over 200% APY for several days!! Crazy market.
Well firstly we will test our options models on Wanchain. As it is fast and with cheap gas. Also it is cross-chain, and we can launch the decentralized BTC options.
Then we will simultaneously run these models on Wanchain and Ethereum, to boost the liquidity.
Sarah: OK, it’s time for today’s weekly chat. Thank you everyone for joining us! See you all next Tuesday!.
Weekly-Chat Recap: 30/06/2020
Participants:
Boris Yang — FinNexus Founder & CEO
Ryan Tian — FinNexus Financial Specialist
Discussion:
Professor K: Today Synthetix options went live and it is remarkable how similar it is to Wandora!
Ryan Tian: Seems we are one step ahead of Synthetix this time :)
I heard that the gas fees on Ethereum is increasing right now and is expensive and slow.
As I would put it. It took me 5 hours to transfer some USDT into USDC.
Professor K: There are 2 main differences between Wandora and Synthetix:
- Synthetix does not use rolling periods. They have a bidding period and then, when it closes, we wait and see who wins the round — Bears or Bulls.
- Synthetix uses a strike price that is nice and round, but also arbitrary, whereas Wandora Box uses the price ending at the end of the previous period.
Sarah: So Gas will effect the platforms?
Ryan Tian: Everything will be effected on Ethereum.
Professor K: Today safe gas price was 63 GWEI. That is very expensive to do anything with DeFi on Ethereum.
Ryan Tian: Seems Synthetix’s binary options are more similar to those in traditional finance.
Professor K: No, not similar. More like betting.
Right now, you can bet bull or bear on July 5 for BTC at $9500.
Ryan Tian: That’s what Binary options are.. Like betting!
Professor K: Bulls take bears’ money if they’re right. Bears take bulls’ money if they’re right. Just like Wandora Box.
Ryan Tian: Anyway, I heard that they are also planning sth like the normal options on Synthetix.
We also included some concise analysis on them in the coinmonks article.
Professor K: Yes, something where you can create bespoke options, like we said in the CoinMonks piece, similar to what Hegic does.
Ryan Tian: Our FinNexus options will be close to be online, and the first version will be a tokenized options model, but we will also cover the pooled one in later phases.
Question 1:
Sarah: Could you explain binary options to our community?
Ryan Tian: Basically, Binary options is the predictions on the direction of the price movement, and there will be only two outcomes.
Unlike the normal options, the more in-the-money, the more buyers will get. Binary options only choose the sides, but not the degree.
like outcome of a “yes or no” proposition.
Professor K: Binary options, it seems, is all about where the strike price happens to land.
Whereas in normal options, since you can choose from a variety of strike prices, it’s more about volatility.
Ryan Tian: It seems the volumes of options are reaching all time high everyday, especially in CEX.
As we put it, the decentralized options market will be the next breakthrough point in DeFi.
Question 2:
Sarah: When can we expect the FNX options platform going live?
Ryan Tian: I would expect within the next two weeks.
Sarah: Will FinNexus Options be an easy and intuitive product for the average user or player?
I mean, if I’m a user, how can I benefit from this product?
Ryan Tian: Yes, we will make it easy and user-friendly. There are normally two sides, buyer and seller.
Buyers/holders can hedge, speculate or insure their crypto assets from the FinNexus Options platform, without worrying about the counter-party or custodial risks.
Sellers/writers can be benefited with the premiums by minting options tokens. More interestingly, unlike most of the options platforms on Ethereum that need 100% collateral on the strike asset, FinNexus will provide a more flexible margin requirement
I will elaborate here,
For a Call option margin:
The writer of a call option shall lock up the option margin in the smart contract. In cases that the price of the underlying asset rises, especially if it exceeds the strike price (in the money), the option seller will bear the loss after the exercise, and generally, the writer’s margin should increase; if the price of the underlying asset drops and is lower than the exercise price (out of the money), the buyer will not exercise, and the margin should be reduced accordingly.
The bold polyline in the chart below is the dynamic minimum margin requirement for a FinNexus call option writer. If the deposited USD value of the collateral is above the polyline, it means the collateral ratio is over 100% and the position is safe. If it drops below the line, it means the collateral ratio is less than 100% and the position should be liquidated.
Professor K: Let us simplify it.
Ryan Tian: For example, for a BTC call option with a strike price of $7000, when 6300 ≤ market price P ≤ 9100, the minimum margin required is $3500 (0.5*$7000), which means when the writer deposits $7000 margin into the SMC, he or she may mint up to 2 option tokens. When the BTC price P is $5400, the minimum margin for minting one option token is $3000; while, when the BTC price P is $10000, the minimum is $4400.
Professor K: How do FNX holders benefit here?
Ryan Tian: The FNX tokens will be used as both the collateral/margin asset and the trading pairs on the FinNexus options platform.
Professor K: I know from looking at testnet that FNX can be used to pay for these products, but what else is in the pipeline?
The FNX will be locked to provide collateral backing the option tokens. Apart from the premiums that will be distributed to the writers (holders of collateralized FNX), there will be extra benefits, like FNX farming or mining
Additional FNX tokens will be distributed as reward to these participants, like what Compound or Balancer is doing right now. These mechanisms will give additional incentive to participate into the collateral game, and bootstrap our initial liquidity and TX volume.
Wanchain is both cheap and fast, while Ethereum has a big DeFi family now.
We are planning to launch the model on both the platforms.
Sarah: So, the rewarding FNX will be given to options writers, and they can deposit in the pool as collateral?
Professor K: We haven’t figured out exactly how the liquidity mining programs will work. We want to make sure we are incenting the right behavior that is best for platform growth. But, yes, there will be an element of compound growth there for FNX stakers.
Ryan Tian: Especially when the real world economy is hammered by the unforeseen virus. We wouldn’t want to put extra risks on the participants. We need to make sure the right participant gets rewarded accordingly, and find a good way to make it sustainable.
Professor K: There will probably be an element of experimentation as well. We don’t want to have some of the problems that BAL and COMP have run into as a result of their liquidity mining programs. The better model is the trial approach that Synthetix used.
Ryan Tian: There’s some genius brain in the SNX model, and we are surely thinking of that :) Actually, the prototype of the FinNexus options V2 is there
As we have briefly mentioned in the coinmonks article, it will be a universal pooled model especially for options
Both for minting puts / calls, and transactions.
Professor K: One of the mistakes BAL made is just saying we are going to brrrr all these tokens for the next 8 years… Better to say, We will try this incentive out for a minimum of 2 weeks and then we will see how it goes…
Sarah: Glad to hear that, We are glad that you are willing to share the design process and design concept with the community, which makes us feel involved.
Professor K: In a way, we are building in the reverse order that SNX built their platform. They are now just getting to options after making a pretty good tokenization platform. We will start with options and then focus on cross-chain tokenization efforts once the options platform is up and running.
Ryan Tian: We are confident that we are on the right track and the potential of options is so big that one might now be able to imagine.
Professor K: Our research in the coinmonks article proves that a lot of people agree with us. Here we have 8 options platforms. And since the article we have found 2 more!
Sarah: I’m curious that you’ve done so much solid research, and I’d like to know which product or option model you most like, and in which position do you think in this form?
Ryan Tian: Also, They are not our competitors right now, and the derivative market is just getting started. We want to see more participants on the same track.
Boris Yang: We have finished the new model design basiclly. We will try to take it online after the first version is done. I think the model Ryan designed is perfect.
Ryan Tian: It will bring some new features into the market, and create a successful options ecosystem.
Professor K: Some users will prefer binary options. Others maybe customized options. Others probably like more traditional protocol-standardized options.
Question 3:
Sarah: Will the options platform be user-friendly? Like Wandora box and Jack’spot?
Ryan Tian: Yes of course, and it will be on the market soon as we said.
Everyone is welcome to have a try.
Sarah: Ok, that’s the end of today’s Weekly Chat. Thanks to RYAN, Boris and Prof K for sharing so much information😁
we are glad that we can see the progress of Option every week and see the good progress every time
In addition, I would like to remind you that our Weekly Chat is fixed at 12:00 GMT every Tuesday night. I hope you can join us next time and ask any questions you want to know!
About FinNexus
FinNexus is building an open finance protocol to power hybrid marketplaces that trade both decentralized and traditional financial products. The FNX token will live on the Wanchain blockchain to take advantage of the most robust cross-chain capabilities currently available in the industry. The first products FinNexus plans on releasing will be innovative tokenized assets (available Q1 2020) with value based on real-world cash flows.
