• Latest
Options Protocol Brings ‘Insurance’ to DeFi Deposits on Compound

Options Protocol Brings ‘Insurance’ to DeFi Deposits on Compound

February 12, 2020
ygg sea surpasses 10,000 scholarships in just six months of launch

YGG SEA Surpasses 10,000 Scholarships in Just Six Months of Launch

May 6, 2022
mintable launches industry changing gas free minting service on ethereum

Mintable Launches Industry Changing Gas Free Minting Service on Ethereum

May 1, 2022
5 projects enabling smart contract development on bitcoin

5 Projects Enabling Smart Contract Development on Bitcoin

April 29, 2022
bitcoin atm installed in mexico's senate building

Bitcoin ATM installed in Mexico’s Senate Building

April 27, 2022
cross chain services play a crucial role in facilitating continued adoption of defi applications

Cross-Chain Services Play a Crucial Role in Facilitating Continued Adoption of DeFi Applications

April 26, 2022
justin sun launches usdd, integrating the blockchain world and the real world with the decentralized stablecoin

Justin Sun Launches USDD, Integrating the Blockchain World and the Real World with the Decentralized Stablecoin

April 25, 2022
nfts: the next musical revolution

NFTs: The Next Musical Revolution

April 24, 2022
things you should know before investing in nfts

Things You Should Know Before Investing in NFTs

April 24, 2022
what are wrapped tokens?

What Are Wrapped Tokens?

April 23, 2022
what is the future of ethereum (eth)?

What is the future of Ethereum (ETH)?

April 22, 2022
green gaming

Everything You Need to Know About Play-to-Earn on Algorand in 2022

April 21, 2022
$ape going bananas as rumors of upcoming land sale of bayc metaverse gather momentum

$APE Going Bananas As Rumors of Upcoming Land Sale of BAYC Metaverse Gather Momentum

April 21, 2022
  • Home
  • Coin Market Cap
  • Bitcoin
  • Ethereum
  • Ripple
  • Litecoin
  • Alt Coin
  • Business
  • Trading
  • Mining
CoinNewsDaily
  • Home
  • Coin Market Cap
  • Bitcoin
  • Ethereum
  • Ripple
  • Litecoin
  • Alt Coin
  • Business
  • Trading
  • Mining
No Result
View All Result
  • Home
  • Coin Market Cap
  • Bitcoin
  • Ethereum
  • Ripple
  • Litecoin
  • Alt Coin
  • Business
  • Trading
  • Mining
No Result
View All Result
CoinNewsDaily
No Result
View All Result
Home Business

Options Protocol Brings ‘Insurance’ to DeFi Deposits on Compound

coinnewsdaily by coinnewsdaily
February 12, 2020
in Business
0
Options Protocol Brings ‘Insurance’ to DeFi Deposits on Compound
189
SHARES
1.5k
VIEWS
Share on FacebookShare on Twitter

Related articles

ygg sea surpasses 10,000 scholarships in just six months of launch

YGG SEA Surpasses 10,000 Scholarships in Just Six Months of Launch

May 6, 2022
5 projects enabling smart contract development on bitcoin

5 Projects Enabling Smart Contract Development on Bitcoin

April 29, 2022

Trustless insurance has arrived on decentralized finance (DeFi). At least on the Compound protocol, the collateralized lending platform that runs on ethereum. 

The new product, from a company called Opyn, allows people to take out options on stablecoin deposits, allowing users to hedge against the risk of a catastrophic event wiping out Compound’s books.

“You can make a claim at any time. You don’t have to prove anything to anyone,” Zubin Koticha, one of the three co-founders behind the new product, told CoinDesk.

The decentralized web may have reduced the need to trust intermediaries, but that doesn’t mean there isn’t risk. As the broader DeFi market grows past $1 billion in committed crypto, users need ways to manage that risk just as in the old market. 

To that end, Opyn is the beginning of a blockchain-style solution analogous to those found in traditional financial markets. As it happens, derivatives are so big in those markets that it’s somewhat ridiculous even to repeat their estimated market size.

Meanwhile, Compound is the third-largest DeFi app on ethereum, as measured by DeFi Pulse. Users can earn interest on funds they deposit into the protocol, and they can also borrow against their deposits.

Compound has been stable since launching in late 2018, but no one disagrees that this world of DeFi is still tiny and hasn’t really been tested in the fires of true panic. If more serious investors are to start using Compound, they will want a way to hedge.

Multicoin Capital’s Kyle Samani told CoinDesk one of the perks of DeFi is the ability to make applications work together without having to ask permission (also known as composability). But this feature might yield surprises.

“We don’t yet have enough evidence to know that they work as intended 100 percent of the time. And so, the more that users layer these protocols together, the more systemic risk grows,” Samani said.

“There is certainly a non-trivial amount of risk in the ecosystem, as a lot of smart contracts present substantial surface area for bugs or attacks to occur,” Autonomous crypto fund founder Arianna Simpson told CoinDesk. She said the industry is working on this challenge, citing Nexus Mutual as a company that already provides insurance services for smart contracts.  

On risk, Koticha says he’s talked to a lot of people in the space about their fears of depositing on Compound.

The computer types fear a bug or a hack, knowing that smart-contract languages can be very touchy. Financial types fear a liquidity event. For example, what if everyone just decided to close their deposits all at once? 

Opyn’s first product will offer a hedge, what financial types call a “put option,” which will guarantee that a user can recover most of their lost capital if Compound has a disaster. 

“Options are great oracles of volatility and risk in traditional markets,” Koticha said.

Koticha declined to name the project’s investors. 

How it works

Opyn isn’t offering insurance in the traditional sense. There will be no credit check or claims process or even proof the person owns the asset being insured (more on that further down).

In fact, starting out, Opyn isn’t even going to ask users to submit know-your-customer (KYC) forms.

The team’s ethereum-based Convexity protocol can make all kinds of options, Koticha said. For now, it’s simply making put options to protect Compound users. 

To explain that first product, we need to back up and talk about how Compound works. If someone makes a deposit onto Compound, of say, 100 DAI, they get cDAI tokens back. cDAI tokens appreciate in the user’s wallet at whatever rate the underlying asset is appreciating. This makes deposits on Compound tradeable. 

For simplicity’s sake, let’s say that 1 DAI equaled 1 cDAI (it doesn’t, but let’s say it does). With Opyn, someone pays a small fee to buy an oToken. That oToken would be good for a year (for now). At any time, any holder of an oToken could turn in their cToken and their oToken and get back (for example) .95 DAI (there will always be a little bit of a haircut).

The advantage for insuring these deposits is guaranteed free money in exchange for staking ETH as collateral. How much the user earns will be determined by the market. New oTokens will be sold via Uniswap and the price will be determined algorithmically.  

So, for a borrower, if someone put 1,000 DAI into Compound, they could go out and buy 1,000 DAI worth of oTokens for what should be a modest fee in normal times. They’ll then feel safe for the next year knowing they can get most of their deposit back if something terrible happened to Compound.

Note: You don’t actually have to hold cTokens to buy oTokens, which has interesting implications for the market. Imagine a trader who foresaw a liquidity run on Compound. They might buy up a bunch of oTokens (a so-called “naked put”) knowing that people will sell their cTokens for pennies on the dollar if Compound got wiped. 

Of course, if they do that, the price of oTokens would start rising and other people would see that and wonder why.

“It’s an early warning signal for the community that something is not necessarily right,” Koticha said.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Credit: Source link

Tags: BusinessCryptoCrypto Business
Share76Tweet47
Previous Post

Why Crypto Sentiment and Prices Are Soaring

Next Post

US Financial Crimes Watchdog Preparing ‘Significant’ Crypto Rules, Warns Treasury Secretary Mnuchin

coinnewsdaily

coinnewsdaily

CoinNewsDaily.com is an online Crypto Coin News Website that aims to provide latest trendy news from market and around the world.

Related Posts

ygg sea surpasses 10,000 scholarships in just six months of launch
Alt Coin

YGG SEA Surpasses 10,000 Scholarships in Just Six Months of Launch

May 6, 2022
5 projects enabling smart contract development on bitcoin
Alt Coin

5 Projects Enabling Smart Contract Development on Bitcoin

April 29, 2022
cross chain services play a crucial role in facilitating continued adoption of defi applications
Alt Coin

Cross-Chain Services Play a Crucial Role in Facilitating Continued Adoption of DeFi Applications

April 26, 2022
justin sun launches usdd, integrating the blockchain world and the real world with the decentralized stablecoin
Alt Coin

Justin Sun Launches USDD, Integrating the Blockchain World and the Real World with the Decentralized Stablecoin

April 25, 2022
what are wrapped tokens?
Bitcoin

What Are Wrapped Tokens?

April 23, 2022
what is the future of ethereum (eth)?
Alt Coin

What is the future of Ethereum (ETH)?

April 22, 2022
Load More
Next Post
US Financial Crimes Watchdog Preparing ‘Significant’ Crypto Rules, Warns Treasury Secretary Mnuchin

US Financial Crimes Watchdog Preparing 'Significant' Crypto Rules, Warns Treasury Secretary Mnuchin

Categories

  • Alt Coin
  • Bitcoin
  • Business
  • Ethereum
  • ICO
  • Litecoin
  • Mining
  • NFT
  • Ripple
  • Tech
  • Trading

What New here?

  • YGG SEA Surpasses 10,000 Scholarships in Just Six Months of Launch
  • Mintable Launches Industry Changing Gas Free Minting Service on Ethereum
  • 5 Projects Enabling Smart Contract Development on Bitcoin

Subscribe to Get More!

Loading
  • About Us
  • Contact Us
  • Privacy & Policy

© 2018-2021 CoinNewsDaily.com by CoinNewsDaily Inc. Crafted with Love by iFtiDev

No Result
View All Result
  • Home
  • Coin Market Cap
  • Bitcoin
  • Ethereum
  • Ripple
  • Litecoin
  • Alt Coin
  • Business
  • Trading
  • Mining

© 2018-2021 CoinNewsDaily.com by CoinNewsDaily Inc. Crafted with Love by iFtiDev

  • bitcoinBitcoin(BTC)$20,049.00-1.43%
  • ethereumEthereum(ETH)$1,093.36-4.66%
  • tetherTether(USDT)$1.000.04%
  • binancecoinBNB(BNB)$219.02-4.08%
  • rippleXRP(XRP)$0.328943-3.27%
  • cardanoCardano(ADA)$0.461626-2.64%
  • SolanaSolana(SOL)$33.67-5.76%
  • dogecoinDogecoin(DOGE)$0.0683872.20%
  • polkadotPolkadot(DOT)$6.95-5.15%
  • daiDai(DAI)$1.00-0.09%
  • Shiba InuShiba Inu(SHIB)$0.000010-0.14%
  • tronTRON(TRX)$0.064518-2.76%
  • leo-tokenLEO Token(LEO)$5.912.89%
  • matic-networkPolygon(MATIC)$0.490275-4.76%
  • litecoinLitecoin(LTC)$53.200.61%
  • FTXFTX(FTT)$24.71-3.82%
  • OKBOKB(OKB)$12.233.81%
  • CronosCronos(CRO)$0.116522-3.19%
  • chainlinkChainlink(LINK)$6.19-2.92%
  • stellarStellar(XLM)$0.108765-5.46%
  • moneroMonero(XMR)$118.54-0.40%
  • cosmosCosmos Hub(ATOM)$7.26-1.54%
  • ethereum-classicEthereum Classic(ETC)$15.15-2.78%
  • algorandAlgorand(ALGO)$0.297498-5.58%
  • bitcoin-cashBitcoin Cash(BCH)$103.980.00%
  • vechainVeChain(VET)$0.022583-4.74%
  • Internet ComputerInternet Computer(ICP)$5.36-3.02%
  • tezosTezos(XTZ)$1.45-6.41%
  • filecoinFilecoin(FIL)$5.39-3.09%
  • theta-tokenTheta Network(THETA)$1.22-4.83%
  • ElrondElrond(EGLD)$49.39-5.60%
  • bitcoin-cash-svBitcoin SV(BSV)$56.70-1.47%
  • eosEOS(EOS)$0.93-2.12%
  • paxos-standardPax Dollar(USDP)$1.00-0.14%
  • AaveAave(AAVE)$58.78-3.72%
  • makerMaker(MKR)$908.38-4.72%
  • huobi-tokenHuobi(HT)$5.01-3.21%
  • iotaIOTA(MIOTA)$0.267449-3.71%
  • zcashZcash(ZEC)$56.96-4.52%
  • neoNEO(NEO)$8.54-5.03%
  • basic-attention-tokenBasic Attention(BAT)$0.3795690.13%
  • zilliqaZilliqa(ZIL)$0.039157-5.93%
  • havvenSynthetix Network(SNX)$2.36-8.78%
  • wavesWaves(WAVES)$5.29-2.70%
  • dashDash(DASH)$44.30-5.22%
  • PancakeSwapPancakeSwap(CAKE)$3.04-4.77%
  • KusamaKusama(KSM)$48.53-3.85%
  • nemNEM(XEM)$0.038899-3.73%
  • Elrond ERDElrond ERD(ERD)$0.0259290.00%
  • CompoundCompound(COMP)$49.543.92%
  • ethlendAave [OLD](LEND)$4.103.48%
  • qtumQtum(QTUM)$2.83-3.10%
  • bitcoin-goldBitcoin Gold(BTG)$16.09-2.61%
  • omisegoOMG Network(OMG)$1.84-2.08%
  • golemGolem(GLM)$0.240287-0.50%
  • SushiSushi(SUSHI)$1.04-5.27%
  • ontologyOntology(ONT)$0.228727-3.28%
  • yearn-financeyearn.finance(YFI)$5,516.07-3.90%
  • umaUMA(UMA)$2.54-3.12%
  • digibyteDigiByte(DGB)$0.009087-3.41%
  • UniswapUniswap(UNI)$2.4438.80%
Posting....