Opyn & 0x Community AMA Recap

This post was originally published on Opyn

Wade Prospere

Mar 16 · 7 min read

Opyn and 0x hosted a joint community AMA on Thursday, March 11th on the 0x Discord!

Co-founder and CEO Zubin Koticha, Head of Research Andrew Leone, and Head of Marketing and Community Wade Prospere answered questions submitted by the Opyn and 0x Community. The conversation was organized and moderated by Brent Oshiro of 0x!

You can read about the 0x integration here.

If you want to be involved in future AMA’s, be sure to join the Opyn Discord channel.

The following transcript was edited and consolidated for clarity.

Q1: How do limit orders actually work? We do not need to send a blockchain transaction, I don’t get it.

biswap

Great question! 0 gas limit orders are made possible by 0x’s unique off-chain relay, on-chain settlement architecture:

1. Limit orders are created and submitted off-chain to 0x Mesh

2. When the limit order fills, the transaction settles on-chain & the taker of the order pays the fees (Gas & 0x)

Q2: Hi guys, first off I’d like to say I think Opyn is a very interesting project, its exciting to be seeing on-chain options start to materialize in the space.My main question is how do you plan to bring increased liquidity to your available options, especially on ITM contracts.

Answer:

Thanks very much for the kind words! There are a few things we’re working on to add liquidity to the platform:

1.We’re working to bring more market makers to the platform and are actively talking to those that are interested.

2. Andrew and the rest of the research team are focused on researching options-specific AMM designs to figure out which design will be the best for Opyn. We see future front ends / APIs aggregating liquidity between AMMs, orderbooks (0x l1, 0x l2, other orderbooks, etc), and other platforms/trading venues. We want to enable and build the tools that allow robust liquidity from a variety of MMs/LPs/users.

3. We just launched a USDC Liquidity Rewards Program! Traders who add liquidity to the Opyn orderbook (eligible limit orders) are competing for a reward pool of up to 3000 USDC per week. Full details are here!

4. Lastly anybody can be a market maker by placing limit orders on the orderbook. 0x off-chain relay, on-chain settlement architecture make this really cheap 🙂

Q3: What are some upcoming features coming soon and what is Opyn’s focus over the next 6 months?

Answer:

Currently focusing on:

  • Reducing margin requirements
  • Adding options on even more assets (WBTC is next)
  • Increasing liquidity through the development an options-specific AMM and bringing more market makers on board
  • Dramatically improving UI/UX (we’re speaking to design teams this week and hoping to move forward ASAP)

Q4: Why are you using open orderbook like 0x instead of an AMM? 2-way Augur markets — which are essentially binary options — used to by/are traded in Balancer pools, closing shortly before resolution. Wouldn’t it be an easier and more efficient solution?

Answer:

The fact that options have a time decay and their inherent leverage can cause issues when placed in a traditional AMM such as balancer or uniswap without any tweaks or design considerations. One main issue is that the IL can be 100% of the asset in the pool, and will occur for options that expire out of the money if it is a simple pool with an option and USDC in it.

We are developing an option specific AMM, because we believe that these nuances of options require specific designs and considerations that generally don’t work well in a traditional AMM.

0x’s orderbook has a lot of benefits for users and market makers. Limit orders are a great thing that users can do with 0x and a limit order book allows market makers to provide liquidity in a form that they are more accustomed to.

In my opinion, AMMs and orderbooks will be part of the future of Defi and options in defi. The buyers/sellers as well as LPs/Market makers are often different and serve different markets.

Q5: Any plans beyond vanilla European?

Answer:

We think that vanilla options are just the beginning. We are excited for the development of structured products, VIX and vol as an asset class, systematic strategies, margin improvements (cross margin, portfolio), new derivatives that haven’t existed in the traditional financial world, and more!

Q6: when will we be able to work with calendar spreads and diagonals from the platform?

Answer:

Calendar and diagonal spreads are a bit tricky in Defi, but it is something we want to support. I don’t have a timeline on it, but our next priority and release is a reduction in margin where options can be collateralized with less than their max loss (ie <strike for a put, or <1eth for 1 eth call).

As an example, a long calendar spread (buying a longer dated call to sell a shorter dated call with the same strike) can generally require 0 collateral. However, at expiry the long call may need to be sold (or exercised in the case of American options) to pay off the short call cash value. That is tricky in defi due to front running and liquidity issues currently.

Q7: Opyn team, thanks for doing this. My question is a broad one — do you have a framework for how Opyn fits into the market with respect to other major decentralized options platforms? What are the key differentiators, or what strategic choices are you making that you think will set Opyn apart?

Answer:

Hey Danial — this is a great question.

Opyn’s goal is to be hundreds of times better than any other protocol and fundamentally redefine the world’s options markets.

How will we do that?

1. Capital efficiency — you’ll need only a fraction of the capital in order to trade. Launching in the next 6 months

2. Options on everything — you can trade options on every ERC20 w/ an oracle. Launching within 1 year.

3.. Liquidity, liquidity, liquidity — you can get a great price for a great size , an AMM + increased market maker incentives on orderbooks — this is the hard one, like really really really hard. It’s like reinventing black scholes on-chain but in a way that will not get arbed by the smartest minds in the world despite oracle lag, MEV, flash loan attacks, etc. But we are on the verge of something in the research phases

When we solve these, options will explode in DeFi to a size never seen before!

Q8: I just glimpsed over the introduction, what is Opyn. When we are talking, is the goal to behave like a stock exchange in that you can buy derivates on commodies like oil, gold etc ? I really wondered when i could buy ETCs decentralized

Answer 1:

For the next 6–12 months, the goal is to bring options to DeFi — the vast majority of volume trading on DeFi is on crypto assets, so we are focusing on that because it seems like what users want!

Though things like gold, oil, etc. are really interesting in the long run!

Answer 2:

Great question, not out of scope! Right now Opyn is entirely focused on options. As @zk mentioned in this message, our goal is to fundamentally redefine the world’s options markets. Doing so will unlock enormous value within DeFi. For example, DeFi users and large institutions will be able to manage risk more effectively, which should lead to more investment and capital inflow into the space. We’re really focused on capital efficiency right now! We are taking features that work well from a traditional finance standpoint, but really making sure we’re applying those to DeFi’s unique characteristics and innovating. We’re not trying to reinvent the wheel. We want to improve upon everything. We’re not focusing on derivates on commodities like oil, gold at the moment, but anything is possible in the future. There’s also so much innovation going on in the space that I’m sure you’ll start to see other protocols pop up!

Q9: Hi Opyn team! We are getting close to establishing a DAO, which will have a community-run treasury that we can use to fund activities that benefit, extend, and improve the 0x protocol. From your experience integrating the 0x protocol into your product, are there any ideas you can share about things we might want to consider for funding to make things easier for other teams building on 0x? For example, any specific code development or developer tools, etc.?

Answer:

We are very excited to hear about the 0x DAO and have been following along!

I’ve asked our engineers as well to weigh in on this and will share any feedback they have.

One thing that I have been thinking about (and was planning to reach out on) is allowing 0x orders to have something occur before execution — an example would be a market maker or user that is lending USDC on Aave or Compound and upon execution that is unwrapped before being traded.

An example for an option would be that a users could atomically mint an option before their limit order is filled. That would be an interesting use case that could unlock capital efficiency as users wouldn’t need to have an option to market make it (they would just need sufficient USDC or ETH to mint an option if their limit order was matched).

Comment from the audience: I mean its obviously the future of finance, banks are done as long as the sector doesn’t collapse based on hacking / fraud issues

recently i have been hearing about defi scams / hacks / inside / xyz things so thats one thing to be aware of for sure.

Answer:

For sure. Protocol security is the absolute top priority. We will be conducting more audits, and we also launched a $100,000 bug bounty program

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