OptionPanda(OPA) will Launch at Gate.io Startup: Get 1+ Million OPA Free Airdrops!

OptionPanda, a decentralized option protocol, announces that it will start to offer the opportunity to subscribe for OPA, which is OptionPanda’s governance token, at zero cost on Gate.io on May 31. All eligible Gate users can get OPA for free and enjoy a variety of benefits with the tokens purchased, such as community governance and mining.

OptionPanda is a DeFi option protocol tailored for the blockchain. It will be first launched on the BSC to provide decentralized option transactions, which features great importance in counteracting drastic market changes and enhancing investors’ income.

In the wide ocean of the blockchain, what does the future hold for DeFi?

In the investment market, excellent option products are indispensable for investors to hedge risks and pursue high returns.

The recent sharp drop in the crypto market seems to have brought the bull market to an abrupt end. Under the leadership of Bitcoin, almost all tokens have plummeted. The continuous on-chain liquidation has further stirred up uneasiness among blockchain investors. In particular, the liquidation of DeFi mortgage and lending may trigger a series of blown-ups, which will pose an enormous threat to the market. Investors on the one hand, are becoming so fidgety that they are paying attention to the price change as subtle as US$0.1 of Ethereum. While on the other hand, they lack any hedging and risk prevention methods.

The volatility in the market has alerted newcomers of the changing nature of the blockchain and for the veteran investors, seeing the drastic price change, they can’t help lamenting the immaturity of the market and the under-development of risk hedging. In this sense, options are a lifesaver for investors especially when DeFi is playing an increasingly important role in the blockchain.

Existing crypto option products, especially centralized options have the limitation of insufficient liquidity. DeFi options lack innovation and fail to unleash the huge market demand. The latest plummet cpuld have been the opportunity for options to give full play to its strength. But the reality is that none option products made a major breakthrough and saved the market. As shown in the figure below, Bitcoin’s option volume did not increase.

Tailored for the blockchain, how does OptionPanda redefine crypto options?

When designing option products, OptionPanda team bears in mind the innate characteristics of the blockchain, i.e., rapidly changing, and provides European-style options with high frequency and automatic exercise. OptionPanda provides options with expiry periods of 15 minutes, 30 minutes, 45 minutes and 1 hour, and ensures the consistency of option exercise price and purchase price. This perfectly meets the need of users who perform frequent transactions and helps investors respond to market changes and adjust their positions timely in the volatile blockchain market. Short-term and high-frequency options are also in line with the characteristics of rapid transaction confirmation and low transation fees on BSC.

Most option products are voided upon expiration. If this mechanism is also used for short-term options, it will cause a lot of inconvenience to traders, and even compromise some of the original benefits. To avoid this issue, OptionPanda option products are automatically exercised, which not only guarantees transaction profits, but also exempts traders from transaction fees. These features make transactions more convenient and provide better user experience. Users only need to make a market, predict the trend and then trade. Operations such as option exercise and related matters are resolved.

How does the innovative AMM pool design fully unleash the liquidity potential and highly increases capital efficiency?

OptionPanda relies on and innovates the traditional AMM approach to ensure the liquidity and depth of option transactions. The general design principle is to allow market makers to have higher returns and at the same time provide them better protection.

Specifically, OptionPamda divides the AMM pool into a call pool and a put pool. If the liquidity provider expects BTC or ETH to appreciate in the near future, then they can add liquidity into the AMM pool of call options, to have a greater chance of earning income. For market makers, they can also inject liquidity into both pools to increase the utilization rate of funds and secure profits in different market conditions.

In terms of protecting market makers, Option Panda limits the total issuance of each option in the call and put pools to ensure that the upper limit of options with different maturities is evenly distributed, and to avoid potential concentration risks faced by option underwriters. Option Panda also sets a 75% utilization upper limit for each AMM underwriting pool to control liquidity risk. Although such a setting seems to constrain the trading volume of options, it will attract more users when we see it from a longer-term perspective. More often than not, there are often violent market fluctuations before the settlement of options. If the price of BTC or ETH suddenly rises or falls, users may lose all their funds in the pool and therefore can not redeem their investment, which is a great loss for both option buyers and liquidity providers.

Flexible pricing & transparent settlement

On the basis of Black Scholes, a formula widely used in the pricing of European-style options, OptionPanda incorporates a dynamic Sigma adjustment mechanism that combines smart contracts and the ChainLink prophecy machine. Such a combination enables real-time on-chain calculation of option prices.

Using the historical volatility sigma as the initial parameter for option price calculation, if more than 90% of the options generated in the auction are sold, it indicates that the market is overheated or investors’ risk appetite is high. Sigma is then adjusted upward by 5% in the next auction event; if no more than 50% of options are sold in the auction, this indicates a cooling market or a low investor risk appetite. In the next auction, Sigma will be adjusted downward by 5%. This mechanism will provide flexible pricing adjustments based on the popularity of trading, i.e., demand, which will allow users to trade at a more reasonable price.

When settling, OptionPanda also takes into account of traders’ interests. OptionPanda products are US dollar-based, which indicates that options are settled in US dollars and delivered in the purchased option currency. Option buyers pay in US dollars when buying options and the income generated is also denominated in US dollars. The underwriting pool pays the equivalent option tokens to investors. The profit and loss of both buyers and sellers of options are calculated on the basis of fiat currency. There will be no impermanent loss.