I can see the top Options dex hitting $1bn-$5bn valuations in the next few years in peak bull. This means some of them have 100x potential 👀
But which one will it be?
Let's take a look at what the @lyrafinance #LYRA Newport upgrade brings
#defi #options #optimism #lyra
Content
1️⃣ Lyra overview
2️⃣ Why was an upgrade needed?
3️⃣ What Is Lyra Newport?
4️⃣ Cash Collateralization
5️⃣ Modularity
1️⃣ Lyra overview
LYRA is an on-chain Options trading protocol based on an automated market maker (AMM) where you can buy/sell call or put options on #ETH, #BTC
Lyra was built on top of #SNX on #OP but has now expanded to arbitrum where it integrates #GMX
LPs provide liquidity in a MMV (Market Making Vault) which means they are taking the opposite side of the trade from the Options buyers, earning trading fees as rewards
Currently the Vaults offer 15-75% APR 👀 for providing options liquidity (with staked Lyra boost)
Users can deposit $sUSD or $USDC (depending on chain) and earn rewards on their stablecoin deposits
The vaults are also incentivized with $OP tokens on Optimism and with staked $LYRA on Arbitrum.
Staked Lyra also gives rebates for trading fees
But Lyra doesn't let their LPs take that enormous tail-end risk that usually comes with Options selling/LPing, and hedges the vaults exposure through perps and spot holdings
This allows the vaults to become close to Delta Neutral for LPs 👀
If a delta-hedge is performed, the AMM will either open a long or short perpetual futures position using the GMX protocol on Arbitrum or a spot synth position using the Synthetix protocol on Optimism.
Lyra is currently at a $38m mcap with $161m FDV
Token emissions are conservative
TVL is $28m
2️⃣ Why was an upgrade needed?
Before the upgrade, the Options sold by the MMV were collateralized and hedged with synth spot positions (sUSD or sETH)
This was expensive (30 bps fees) and very capital inefficient
3️⃣ What Is Lyra Newport?
Newport is an upgrade to Lyra that makes it possible to integrate with any perpetual exchange on any EVM compatible chain, providing lower fees for traders and better capital efficiency for LPs.
Newport will lead to
✅Improved capital efficiency for the AMM
✅Lower spreads and an improved trading experience
✅New opportunities with increased system modularity
4️⃣ Cash Collateralization
Lyra can now partially collateralize short positions with cash, removing the need to swap to the base asset and instead using perpetuals to collateralize and delta hedge.
This means that 70%-90% of the deposits in the MMV can be used as liquidity while the rest hedges and collateralizes the sold options
A large part of the profits of the MMV have been eaten up by trading fees for swapping collateral and hedges, so with the upgrade LPs will earn higher fees from the same volume
As the Cash Collateralization also reduces the MMVs exposure to the underlying assets there will be less trading fees spent on hedging the Delta
A 6.6x improvement in trading fees is expected
5️⃣ Modularity
By implementing a modular architecture Lyra can now easily expand to any EVM chain and any perp-dex
The first chain they have expanded to is Arbitrum, and I'm sure we will see more chains in the future to attract more users from other chains
This also allows Lyra to expand outside of the SNX ecosystem
I'm super excited to see what kind of integrations and partnerships can be developed on other chains 👀
6️⃣ Conclusion
Lower fees for traders, and higher rewards for LPers, this is a big step forward for Lyras hedged LP Vaults, their largest competitive advantage
#LYRA is not yet tradeable on Binance but you can bridge to Optimism or Arbitrum to get started
Remember that this is not financial advice, you have to DYOR
