Introduction to DeFi Options

DeFi-First

On-chain options protocols have gone through a cambrian explosion of designs, innovating at every layer of the stack, from on-chain orderbooks, to specialized derivatives blockchains, to AMMs alchemizing volatility through asset pooling, and everything in between.

Embracing Illiquidity

DoubleMarket takes a different approach and embraces illiquidity. By separating primary liquidity from secondary liquidity and simply allowing users to whitelist and arbitrage between the permissioned and permissionless, similar to Ethena, DoubleMarket ports the billions of options liquidity available on centralized venues into decentralized ones.

DeFi-First Design

DoubleMarket makes crypto options trading as straightforward as swapping any ERC-20 token. The protocol was designed to translate complex options trading UX/UI into familiar token swaps without sacrificing pricing and liquidity. Although minting and redeeming tokens requires whitelisting, once created, tokens can be made available in a simple weighted AMM pool.

Semi-Fungible Tokens

Options positions are minted as SFTs (semi-fungible tokens), with each series of token representing a generic derivatives contract (including terms such as strike price, maturity, etc.). Liquidity for minted positions is sourced from liquid markets such as Deribit. Collateral for positions is held through off-exchange wallets enhancing security, transparency, and decentralization.

RFQ-Less

Unlike most decentralized options protocol, DoubleMarket is RFQ-less, and deep liquidity is available instantly, even for multi-leg orders. Minted positions can be staked within DoubleMarket, providing additional utility to users. DoubleMarket relies on governance to select hedging venues and counterparties, avoiding the need to build and stress-test its own margin engine and liquidation system.