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With their not-so-typical goal, disrupting the entire finance industry using blockchain technologies, a group of former bankers and engineers called Degen.VC has attempted to do just that. So far, they have launched eight projects and have a number of others in the pipeline. DegenVC started its financial overhaul quest with an initial goal of disrupting VCs and has evolved this broad starting point into a more defined objective of bringing better-formulated projects to market faster, front-running VCs. To achieve this goal of re-architecting venture finance, they built a system for a factory of smart contracts using their native DGVC tokens to raise funding for VC projects leveraging an innovative decentralized exchange called Uniswap (www.uniswap.exchange). Degen has created a new type of VC project launch where the crowd is given project tokens via an airdrop, and these tokens find their market value on Uniswap. Degen.VC’s goal was to find company gems more efficiently than the typical numbers game played by traditional VCs of 80/19/1; 80% are losers, 19% will do slightly better than break even, and 1% will be wildly successful. Degen.VC has turned these numbers on its head and published the following results:
2 Projects in excess of 10x (DGVC & $EYE)
1 Project in excess of 5x ($OSM)
3 Projects in profit ($R3T, $HCORE & $UBA)
1 Project in loss ($RAUX)
43% of projects deliver > 5x return (4/7).
86% of ALL projects deliver a profit (6/7).
14% deliver a loss (1/7).
Options.Market $OSM
Not being satisfied with just disrupting the VC field, Degen has moved on to a new project that is equally disruptive to the options market, which is growing at hyper speed. This project is un-uniquely named “Options.Market” or $OSM. The project’s roadmap can be found HERE
Options.Market started as a fork of an anon TradFi project backed by VC money called SirenMarkets.com; a decentralized options trading solution for ERC20 tokens. The Degen team saw some glaring issues with SirenMarket’s structure, first having VC influence behind it could build it for the VC rather than the users, and second the development was anonymous, which Siren claimed was for “legal reasons.” This anonymous structure seems opaque and questionable at best and potentially fraudulent at worst. The TradeFi space needs to have a more transparent, open nature to thrive. The one thing that Siren did have going for it was that it was not trying to be too clever, which is what most derivatives projects were/are doing.
Degen is helping to fund the crowdsourced innovation in Options.Market, providing awards and grants totaling $25,000, in a gitcoin hackathon running until May 17th, 2021.
Degen.VC wants a crowdsourced solution to the various issues found in Siren, and the Options.Market fork. They also wish to go beyond the basics, finding solutions to aid in next-generation derivatives markets, such as Structured Investment Products, multi-options strategies like call/put spreads, collars, and butterfly spreads, as well as binary options, a 4th generation derivatives subset, with features including one-touch, no-touch, and other event-driven outcomes. All of these are strategies that options traders and clients currently implement for risk management in traditional markets. Options.Market is a starting point for a decentralized solution that brings TradFi’ers into the blockchain space and with them their experience and funding.
Options.Market’s Innerworkings
Options in their most basic form provide traders with a choice to buy or sell an asset at a defined future time and price. Options are used to hedge against future price changes, as well as for speculation on those price changes. With Options.Market both long and short sides of options contracts are tokenized, and a secondary market is created for both long and short exposure. A “bToken,” named for the “buyer’s” side, gives its holder the right to buy or sell the defined asset (such as a currency pair or defined quantity of a commodity) at the specific strike price. A “wToken,” named for the seller’s or “w”riter’s side, gives its holder the ability to withdraw the collateral of an unexercised option or the payment if exercised after the contract’s expiration date.
Yield farming- growing more crypto by lending already owned crypto to others for use in smart contracts. In return, lenders earn fees in the form of crypto.)
Yield farming- growing more crypto by lending already owned crypto to others for use in smart contracts. In return, lenders earn fees in the form of crypto.)
Options.Market is designed in such a way to render the use of the classic pricing oracles and other interfaces found in the traditional options markets obsolete, instead, each trade is fully underwritten and collateralized by token holders that combine to make liquidity pools. These crowdsourced underwriters who supply through the Automated Money Maker (AMM) are handsomely rewarded with 32.5% of the total token supply.
Options are a right and not an obligation for a transaction. The buyer of an option is paying a small premium for this right. If the position is sitting at a loss on the expiration date, the only thing lost is the premium paid. None of these concepts are complicated, but other players in the blockchain TradeFi space are attempting to make them seem that way to make the barrier to entry appear high, DegenVC and Options.Market knows it is not and are working on a simple solution.
Options.Market has been created transparently, ensuring ease of use, low complexity, and, lacking in many projects, an easy-to-explain model. They are not inventing anything; rather, they are finding better solutions to already developed software, making the more useful pieces work smoother and more reliably, and expanding where needed. This means that their design is built on simplicity, and the result is an oracle-free and fully-collateralized market-maker, the goal of any TradeFi project.
Potential Growth of Options.Market
The derivatives market is, in a word, gigantic—often estimated at over $1 quadrillion on the high end. How can that be? Largely because there are numerous derivatives in existence, available on virtually every possible type of investment asset, including equities, commodities, bonds, and currency. Some market analysts even place the size of the market at more than 10 times that of the total world gross domestic product (GDP).
In 2020, the centralized exchange Deribit BTC options volume totaled just less than $57 billion; so far this year Deribit BTC options volume has surpassed $120 billion and is on pace to reach $360 billion - a 600% increase in one year. And that is just on BTC alone - last week, for the first time ETH options volume on Deribit surpassed BTC and they had a combined daily volume of $2 billion. Deribit investor and Three Arrows Capital CEO Su Zu predicted that in 2021, "Options markets volume to become over 50% of all crypto derivatives markets."
It is clear that options volume/demand will continue to increase and the vast majority of that volume is currently on centralized exchanges Deribit, CME, Ledger. There certainly is a need and market for Dex option exchanges. There are currently a few DEX options exchanges that are live: FinNexus, Hegic and Hedget. By comparing them we can get insight into the potential growth of Options.Market $OSM.
FinNexus: is a cross-chain DeFi protocol for writing and buying options that is currently live on Ethereum with underlying asset support for BTC, ETH, LINK, SNX, and MKR and has a current market cap of $14 million.
Hegic: is a protocol allows users to create, maintain and settle trustless options-like on-chain contracts with underlying asset support for WBTC and ETH. Hegic’s current total market cap is $88 million with a previous high of $208 million.
Hedget: is a non-custodial options trading platform built on Ethereum currently in Alpha only offering options on BTC. Hedget’s current market cap is $14 million.
Options.Market current market cap is just over $2million dollars. They will begin a marketing push at the conclusion of the hackathon that is currently ongoing. The upside here is tremendous – a 6x to catch the MC of FinNexus and Hedget and a just under a 40x to catch the MC of Hegic. Of course, in order to see any growth they need to deliver a functional and user friendly protocol.
The market is there – lets see if Options.Market is able to capture it.
Please DYOR this article is not financial advice.
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