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Cronos - Option Factory
  • Defi


Allows various parties to underwrite options for various purposes i.e. to be used as insurance, to hedge against price movements, to generate yield

Dojima Finance aims to fill a number of market gaps in DeFi for lending, borrowing, financial derivatives & insurance.

Building upon the loan architecture some changes in logic can be made to create derivatives i.e. Call/Put Options which have various use cases such as hedging or providing insurance against smart contract failures.

This architecture can then be extended further utilising ERC20 architecture allowing holders of options & underwriters of the vaults to trade their shares of the positions and also allowing anyone to enter these positions for their desired size.

This can then be extended further to have ongoing pools where options with regular expiry i.e. every 7 days are created with rights to execute these options auctioned off with some floor price with a positive expected value creating a perpetual pool for the base asset of the option.

The derivative structure provides the ability to create options to assist users with hedging. For example a user may want to hedge against the price of ETH dropping. An option can be created that gives the buyer the right to buy ETH @ $5000 in the next 90 days this means if the price stays below $5000 the buyer would not need to exercise the option while if the price goes above $5000 then the buyer can buy 1000 ETH for $5000 making a profit. Additionally these options can be turned into pools & follow the ERC20 meaning both the buyer & seller rights on options can be traded on AMM’s creating a liquid market allowing users to hedge against price movements.

The derivative structure provides the ability to create insurance products for users of various defi protocols. For example a vault generating interest on USDC where initially 1 USDC was deposited for 1 IB-USDC could provide insurance for vault users at inception. This would work by locking some USDC away in an Insurance Contract & then allowing users to swap 1 IBT for say .9USDC. This would mean that as long as the vault works as intended and accumulates interest 1 IBT will be worth > 1USDC. So insurance holders will not redeem the insurance (where they swap there IB-USDC for USDC) however if there is some exploit that leads to the value of 1 IB-USDC being worth < .9USDC insurance holders can swap their IB-USDC for 0.9USDC to make up part of their losses.