How Can DeFi Farmers Use Divergence’s Options to Manage Volatility
15 Settembre 2021 - 3:31PM
NEWSBTC
In DeFi, trading crypto options and hedging volatility can be hard.
Divergence, an emerging decentralized protocol, aims to make it
simple for users. It offers binary options for blockchain-native
asset prices, LP tokens, interest rates, and farmed yields. In just
three months after its social media debut, it quickly gained
traction with crypto communities. The protocol is backed by some of
the leading VCs in the blockchain industry such as KR1, Mechanism
Capital, Arrington Capital, and P2P Capital. Its list of angel
investors includes Do Kwon from Terra Labs, Diane Dai from DoDo,
Sandeep Nailwal from Polygon, and Igor Barinov from xDai. It
recently revealed strategic investments from Huobi Ventures and
AscendEx. ‘’To us, we solidly believe Divergence Protocol would be
one of the most important pieces in the Defi puzzle,’’ stated Alex
Dong, Research Analyst of Huobi Ventures. Why Divergence
Divergence’s first product is an immediately scalable, easy-to-use
AMM-based marketplace for binary options. Traders can trade
synthetic binary option tokens on various underlying assets. LPs
can permissionlessly create markets of their chosen strikes and
expiries, using Divergence’s one-step minting and seeding process.
Divergence also simplifies the liquidity provision process by
quoting options in collateral units of any fungible tokens. This
removes a major barrier of entry for many liquidity providers, who
can have more flexibility over capital allocation. Key features of
Divergence include: Enhanced capital efficiency: Providing
liquidity on several on-chain positions is capital inefficient.
Option sellers usually over-collateralize their positions to
maintain their positions on DEXes. On Divergence, options minting
and market-making happen in one single-asset AMM pool. Liquidity
providers can provide capital using LP tokens from lending
protocols like Aave. Selling a binary call and a binary put
requires just 1x collateral and does not involve liquidation. This
is because the max loss per sold binary options is pre-determined
and reserved by the Divergence smart contracts. Extensive DeFi
asset trading options: Divergence provides liquidity providers with
a lot more flexibility than other solutions. They can write binary
options of a select strike, expiry, and underlying with any
fungible token as collateral. This includes tokens from
Ethereum-based DEXes like Sushiswap and Uniswap V3. This feature
means LPs no longer have to additionally allocate capital to make
an options market. Automated rollover mechanism. Many derivative
platforms have hard expiries of options contracts. Upon expiry, an
options market may no longer exist. Divergence’s solution is to
automatically roll over options contracts with similar terms after
their settlement. This ensures continuity in the options market for
LPs. Liquidity providers can save gas since they do not need to
remove and add liquidity to make a new market. This feature is
uniquely available on Divergence. How does Divergence work
Divergence has already released a Testnet version of its
marketplace on the Ethereum kovan testnet. The entire user
experience is simple and straightforward. To onboard, users simply
connect a supported wallet like MetaMask to the Divergence test
app. At the moment, Divergence supports two types of binary
options. Those include options with a single strike and options
with a range strike. These options are tokenized as Spear and
Shield tokens on Divergence. Options with a single strike allow
users to get paid one collateral if the underlying price settles
above or below the single price level. Range strike options pay
collateral when the underlying settles within or outside a specific
price range. One of Divergence’s main innovations is that binary
options are tokenized abstractions within smart contracts. This
enables users to save gas fees that would have been incurred if
these derivative tokens were ERC-20 tokens. Traders can easily roll
over options when they expire without the overhead of creating new
pools and spending gas. These innovations improve the overall
trading experience and allow users to easily trade DeFi options.
What to Expect Divergence has a governance token called DIVER.
DIVER holders are able to vote on protocol parameters and receive
rewards from staking activities. The protocol recently announced
details for its highly-anticipated IDO. On 20 September 2021, it
will launch a public sale for 2% of its DIVER tokens on SushiSwap’s
MISO launchpad. Participants will be able to become early holders
of the DIVER tokens and have the opportunity to claim from a pool
of 256 non-fungible DIVΞR tokens. Following the IDO, it is expected
that Divergence will create its DIVER liquidity pool on SushiSwap
and proceed with additional token listings at other exchange
venues. Following its IDO and token listings, Divergence plans to
launch its mainnet after auditing completion. With the mainnet
launch, traders will have access to decentralized options markets
for a larger number of assets, more collateral choices and an
upgraded interface.
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