The FinNexus Protocol for Options (FPO) Debuts This Week
FinNexus DeFi options will eventually exist simultaneously on both Wanchain and Ethereum.
This week FinNexus will put the first iteration of its decentralized options platform live on Wanchain. Bitcoin (BTC) will be the strike asset, but users will not have to provide wrapped BTC as collateral. In this beta version of the FinNexus Protocol for Options (FPO), the platform will accept WAN and FNX as collateral to mint BTC option tokens. Here’s a little sneak preview of the benefits of the platform.
We’ve gotten a lot of great traction from our recent article on Coinmonks that provides a comprehensive overview of the decentralized options space. The decentralized options space is such a fast growing DeFi niche that we even missed a couple of great projects that we did not include in the 8 platforms we reviewed in that article. Since doing that research we’ve run across Potion Labs and MCDEX, which both offer interesting decentralized options products.
If you haven’t had a chance to check out myself and Ryan Tian’s article, you might just be missing the next big DeFi opportunity. Here’s the link, I’ll wait. It’s a long article — a 30 minute read according to Medium estimates — so maybe click “Open Link in New Tab” and save it for when you have time to fall down a DeFi rabbit hole.
Today, on the eve of FinNexus actually putting something people can use out there, I want to highlight the section of our opus that discusses what makes FPO different from the other options platforms out there.
Previewing the FPO Protocol Cluster
FinNexus is building an open finance protocol to power hybrid marketplaces that trade both decentralized and traditional financial products. FinNexus has already launched its first real-world tokenization product called UM1S, together with its ICTO process. However, the first “headline” protocol, if you will, of the FinNexus project will be our decentralized options protocol V0.1. As promised in our 2020 roadmap, we are shipping a beta version of this platform in early Q3. The rest of the quarter will be spent iterating upon the product that will soon go live this week. More information will be provided shortly in a more comprehensive Medium post by Ryan Tian that will be published soon after this introductory piece.
FPO V0.1 is different from the other DeFi options platforms that we profiled in our Coinmonks article. For starters, this initial version will be launched on the Wanchain public blockchain, which provides much faster transactions and lower gas fees than is possible on Ethereum. In the future, it will integrate Wanchain’s cross-chain Storeman mechanism to allow for fully decentralized options based on BTC and other crypto assets that can flow onto Wanchain through its Storeman Nodes.
But before the Wanchain team completes this critical piece of WAN infrastructure, which we expect to be able to use for FinNexus purposes some time in Q4, the next step for FinNexus will be to run FPO simultaneously on Wanchain and Ethereum. In its ideal form, users will be able to simply toggle between using the Wanchain or Ethereum versions of the platform from the same website.
If you’re interested in the suite of smart contracts that make up FPO V0.1, be sure to check out our FinNexus Github portal. This initial beta version will not implement the complex pooling mechanism we envision for the final form of FPO.
The version that will live simultaneously on both Wanchain and Ethereum we expect to ship in late Q3 or early Q4. It will be based on a liquidity pool model similar to that utilized by Synthetix to mint its sUSD stablecoin, but tweaked to enable the minting of bespoke option tokens. The FNX token will be used as the major collateralized asset to mint both call and put options for multiple underlying assets. The collateralized asset pool will be unique in that it will be able to serve as both the collateral pool for backing the minted options tokens and the liquidity pool for settling those options. Liquidity pool holders will have a tokenized interest in the pool, but individual options will not be tokenized and transferrable. Risks and rewards will be shared among the pool participants.
Hold on, I’m getting ahead of myself. This pooled options model will not be available this week. But that’s what is already being worked on by FNX developers now. For this week, let’s focus on what makes FPO V0.1 unique among other DeFi options protocols out there.
What differentiates the FinNexus Protocol for Options (FPO) V0.1?
We believe there are five important features of FPO V0.1 that will make it an important lego piece for the future of DeFi.
First, the options are tokenized and transferable, after minting. The options will be European type with automatic cash settlement upon maturity. Only the difference will be settled in the collateral currency upon maturity, when the exercise will be automatically done.
Second, the underlying assets and collaterals will be whitelisted and not limited to just ETH or a stablecoin. FinNexus plans to integrate cross-chain assets that are already integrated with Wanchain, but currently underutilized — wanBTC, wanETH, wanEOS, wanLINK and more — to serve as collateral for minting options.
Third, the FinNexus decentralized options platform will use a dynamic margin model as the collateral for writing options. As the price moves further out-of-the-money (OTM) for each option minted, less margin will be needed. At that point, margin can be then removed from the collateral pool or used to mint more options. For in-the-money (ITM) options, further collateral will have to be provided as the moneyness of that option increases. If the margin fails to be maintained at the minimum threshold, the liquidation process will be activated. Liquidators will be heavily incentivized.
Fourth, the FinNexus multi-coin collateral mechanism will provide more flexibility to options writers. There will be a choice of baskets of assets to be collateralized as the margin. In the first version, WAN and FNX will be the main collateralized currency for margin on Wanchain. Other assets will be added to FPO V0.1 as support for them comes online.
Last but not least, FNX liquidity mining will begin soon after launch. Options writers will be incentivized in a number of ways, including the distribution of FNX tokens as rewards in regards to minting and trading volumes on the FinNexus options platform once it goes live.
There are more details to be revealed, but the best way to familiarize yourself with the FNX Options platform is to use it! Please be aware, however, that FPO V0.1 will be an unaudited public beta product. Do not risk more capital than you can afford to lose.
If you have any questions, please engage with us on our social channels below.
About FinNexus
FinNexus is building a suite of open finance protocol clusters that will power hybrid marketplaces trading both decentralized and traditional financial products. The headline product to be released is a fully decentralized bitcoin (and other cryptocurrency) options model that will live on both Wanchain and Ethereum.
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