Introducing Pods
Live on Mainnet
We’re thrilled to announce Pods’ Official Mainnet Release!
Pods is an on-chain options protocol that aims to bootstrap options markets for any ERC20 using an algorithmic pricing and specific AMM model.
In this article, you’ll learn more about why we’re doing it, what it is and how to use it. Our mission is to help you reach a new level of strategies for your portfolio. The first release coincides with the app being the easiest way to hedge crypto in the world. Moving forward, choosing ready-to-go strategies and exposures will be available in a seamless way.
The problem
Volatility is a “hard to tame the beast,” especially in crypto, where daily -/+40% changes are the norm. However, in a global market like ours, there are multiple parties interested in incurring different risks. When managing a portfolio, one may ask how they can protect against a possible crash 📉. Another may look for ways to double down on their belief in an asset’s rise 📈.
The solution
Pods is a decentralized non-custodial options protocol. It allows users to create European puts and calls and trade them through a novel Options AMM that updates the options price algorithmically. Running on smart contracts powered by the Ethereum Blockchain, Pods protocol can provide different risk exposures for users in DeFi.
Who should use Pods?
From regular farmers, traders, and degens, all are welcome to use Pods Protocol.
That's because Pods allows for hedging, exposure, and yield generation strategies. You should consider using Pods if:
- you hold crypto and would like to hedge against price volatility.
- you are looking for yield-generating opportunities while providing liquidity to an AMM.
- you want exposure to buying the asset at a specific price while generating additional yield on your idle (or interest-bearing, aDAI for instance) funds by selling options.
Hedging
The app currently provides the easiest way to hedge crypto in DeFi.
To that extent, users will be able to buy protective put options and hedge their digital assets in a fully decentralized, non-custodial, and easy way. To learn more, check our deep dive on DeFi options.
Yield generation
Providing liquidity to Pods AMM is different than most AMMs known so far. As an LP (and thanks to composability), users will be exposed to multiple yield generation sources:
- For options with smart collateral, interest from aUSDC (currently 8% APY on Etheruem Mainnet).
- For options with smart collateral, rewards from Aave with AAVE tokens (currently 0.93% APY on Ethereum Mainnet)
- The AMM trading dynamic fees (subjected to trading volume).
- And the AMM’s returns. Could be subject to impermanent loss or impermanent gain (learn more about potential returns here).
Getting exposure
Selling put options allows users to get exposure to an underlying asset at a specific price level and gain a premium for that. In addition to the premium gained upfront, users can lock interest-bearing assets as collateral and get even more yield.
If you want to know more about selling options you can find more information about it here.
The product
The product contains two main components: the app and the protocol.
The app
Usability and design are essential for our mission, and we’ve been working hard on creating an app for interacting with Pods options. At the same time, we’ve been leveraging web3 and The Graph, and constantly evolving our UI/UX.
The app facilitates a smooth experience, not only for option experts but also for those who are just discovering the derivatives space. The v1 introduces the ability to trade fully collateralized European put options, with calls in the testing phase (already supported at a protocol level).
The protocol
Pods architecture includes two core components: the Options Instrument and Options AMM.
1. Options Instrument
The protocol provides the contract rules as a wrapper for both calls and puts. The implementation requires 100% collateralization and foresees European options with a physical settlement. There is no exposure to liquidation systems at this point.
2. Options AMM
After studying the CFMM space in 2020 with the intention of optimizing for bootstrapping options markets with low liquidity, we learned that a custom solution would be best suited for LPs. We developed a new AMM to address options specific details and here’s what it can do:
- facilitate bootstrapping an options market that is initially illiquid by using an Automated Market Maker approach.
- price options algorithmically using Black-Scholes and account for changes in factors such as time to maturity and spot price.
- programmatically update the implied volatility based on the supply and demand.
- maintain the liquidity provider’s exposure over time and distribute the pool’s results equitably among participants.
Its implementation foresees the use of Chainlink as the external price oracle’s use to update the spot price of the underlying asset.
Additional gems💎
- Smart collateral — soon we'll have a series using Smart Collateral. Use Aave’s aTokens as collateral while creating options tokens so you never stop earning on your funds. Learn more about it here.
- Providing Liquidity and Stacking Rewards — using Aave on Polygon during our Season 1 represents a collection of rewards:
- AMM returns
- AMM transaction fees
- Yield from Aave
- Polygon liquidity mining on aTokens
- Pods Season 1 NFTs
Security Measures
Pods Protocol audit reports are available here. Pods is hosting a Bug Bounty with Immunefi since April 26th.
The core team currently holds admin keys (learn more about admin powers here), and this launch will have an initial TVL cap of 1,500,000 USD (can increase over time).
Our contracts are open source for you to inspect. Feel free to explore our contracts and documentation for more detailed information. For additional questions reach us on Discord anytime.
DeFi is a highly experimental technology. There are all sorts of risks and code audits are not enough to mitigate them all. Be thoughtful of your funds and never allocate to Pods or DeFi funds that you are not willing to lose.
If you want to learn more about the risks of using Pods this article is right for you.
Going Live
We’re long believers in incremental change and improvement. Going officially live on Mainnet is an important milestone for us and we're incredibly grateful for all the community support, beta testers, demo users, advisors, and colleagues that participate in this journey with us.
We prepared a new type of NFT program to reward our community and most active users. We're looking forward to sharing this with you, stay tuned to our Discord for more details!
About Pods
Pods is a decentralized non-custodial options protocol. Users can create options and trade them through an Options AMM on the Ethereum Blockchain. Pods is the easiest way to hedge crypto in DeFi.
Join the Pods community
app | website | documentation | blog | twitter | youtube | telegram | discord
