GM, this is your Daily Bolt briefing.
In this Friday edition, we’re bringing you up to speed on two important topics in DeFi.
DeFi Options; learn the ins and outs of DeFi options from top project team members.
Uniswap Head of Protocols Sara Reynolds discusses the goals and timeline for the V4 upgrade.
Stay alert, stay informed ⬇️
1/ Three Sigma Twitter Spaces - Options Protocols, Oracle-Less DeFi
Preview: Panelists from Smilee, Premia, Dopex, Rysk, Panoptic, and Three Sigma talk about the challenges in developing a DeFi options protocol, and more! Click here to listen to the full episode (67 mins).
Read our Note (8 mins) and save 59 mins.
Here are some key takeaways:
Tempesto describes how Smilee Finance functions, explaining that liquidity providers can deposit USDC into a vault where it's used to mint options. The APY of providing liquidity is predictable as it depends on implied volatility, not on trading fees. He also mentions the first derivative they launched, the "impermanent gain", allowing users to bet or hedge volatility.
Tempesto talks about the main issues in building DeFi options, including pricing, liquidity, and margining. He explains that traditional finance tools like Black-Scholes model are difficult to implement on-chain. Tempesto also highlights the challenge of gathering enough liquidity for selling options and the need for collateral in DeFi.
Tempesto sees a role for Oracles in DeFi, particularly as Oracles continue to interact with the real world and traditional financial systems. He mentions that there are benefits to Oracle-free protocols, mentioning Smilee's use of Uniswap prices instead of Oracles for spot prices. But he believes that as the blockchain integrates more real-world data, many protocols will continue to utilize Oracles.
Guillaume Lambert, from Panoptic, mentions that the world of DeFi options should move away from traditional methods and reinvent how options are treated. He compares this to the shift from order books to Uniswap, stating that the way trades are made should be rethought.
Saitama mentions that fair prices must be fetched across markets, not just one liquidity pool. He sees a future where DeFi expands beyond Uniswap, which makes it necessary for data fetching from various sources. Despite the potential constraints and updates needed for Oracles, Saitama sees a continued need for them to ensure fair pricing.
Pablitin explains the application of the Uniswap V3 concentrated liquidity model for options. He questions how this will boost capital efficiency for options trading and prevent fragmented liquidity across different strike prices and expirations.
2/ The Defiant - Uniswap V4 Deep Dive w/ Head of Protocols Sara Reynolds
Preview: Sara Reynolds from Uniswap talks about Uniswap V4 launch, features in Uniswap V4, and more! Click here to listen to the full episode (76 mins).
Read our Note (10 mins) and save 66 mins.
Here are some key takeaways:
Sara says that they are considering more developer initiatives and view Uniswap as a public good. She says that anyone can utilize Uniswap's protocol to build interfaces, routers, and peripheral contracts with no restrictions.
Cami asks if Uniswap V4 will capture the most liquidity or whether there'll be different use cases for each version.
Sara says they can't predict how liquidity will move but accepts different use cases for liquidity on Uniswap V4 versus Uniswap V3 and Uniswap V2. She expects a slower migration to Uniswap V4 compared to previous versions as people experiment with the new use cases that Uniswap V4 brings.
Owen asks if there will be a proliferation of different interfaces to accommodate all the different pools.
Sara sees this as a huge opportunity and the possibility of different interfaces built for specific use cases leveraging Uniswap's ecosystem and protocol.
Sara says that the core code and most libraries in the core repository are under the BUSL license, while all the periphery code is GPL.
Sara says that it will be a few months at least before Uniswap V4’s launch as they still have a lot to build. There's no set date for deployment or audits, and they want to extensively test the system before launch.
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