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Minting

Margin Tokens

Margin tokens are ERC-1155 tokens that represent the collateral available to mint options tokens. Margin tokens enable:

  • Ethereum-native use of BTC, SOL, and other tokens as collateral
  • Protocol integrity by ensuring that collateral is immediately held in off-exchange MPC wallets

The drawback of using margin tokens is that an additional minting step is required to convert margin tokens into options tokens. Other protocols, such as Ethena, allow users to mint protocol tokens directly from collateral, later providing a route to move collateral tokens into the multisig. However, this introduces drawbacks such as:

  • Limits on collateral accepted by the protocol
  • Limits on trading amounts as well as additional centralized checks on collateral
  • Potential mismatches with protocol integrity should centralized checks fails

Another alternative solution to margin tokens would have been accepting only ETH as collateral, and then relying on the protocol to trade out of ETH into the desired collateral for minting. However, this would introduce an additional layer of slippage as well as reduce protocol integrity by having potential mismatches between the collateral held by the protocol and the collateral required to mint options tokens.

The use of margin tokens further allows whitelisted users to choose their own degree of protocol risk - certain users may prefer to mint a larger amount of margin tokens for later use, while other users may wish to atomicize the minting of margin tokens with the minting of options tokens.

Margin tokens also open an additional pathway for the protocol to create incentives for whitelisted users to interact with the protocol even when not actively trading.

Minting Options Tokens

Margin tokens can be used to mint options tokens. Options tokens are ERC-1155 tokens representing options contracts. To mint a new position in a new options token (for example, BTC-26JUL24-80000-C), users interact with DoubleMarket by submitting a mint order via DoubleMarket’s UI or API. The primary call parameters are: options token address, quantity, limit price. The call must also

Further, minting positions is subject to trading constraints for a mint order to be accepted. These constraints are to ensure that minting can be done immediately. Constraints include:

  • Leg limit: No more than $100k premium per leg per mint
  • Orderbook limit: No more than 50% of the contracts look-alike orderbook on venue

All mints are effectively submitted as limit orders

Multi-Leg Minting

Users can concurrently price and mint multiple derivatives legs at the same time. Such mints can be used to structure options packages such as call or put spreads.