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Decentralized NFT Options
Just as in traditional art market ...
... the financialization of NFTs is inevitable
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- NFT holders are not incentivized enough to become option writers, despite the financial upside
- Our goal is to attract NFT holders to become option writers and bootstrap the NFT options economy
- NFT owners can 'write options' on their NFTs
- Option callers can purchase the options, at a given strike price, for a given premium and time
- JPEG X options are european, cash settled
- If the option expires in-the-money, the sequence goes as follows:
- The NFT holder can provide the strike vs. market price difference to option caller, or
- Option caller can receive the NFT at option's strike price, or
- NFT is auctioned off
- If the option doesn't expire in-the-money, option premiums are distributed to NFT owners
- NFT owners are incentivized to gain passive income and provide liquidity
- NFT is returned to owner, even if the option goes against them
- Option coverage solution is created to protect the owners from large lump sum expense, at expiry
- Protocol defines strike price and premium pricing options
- Protocol stakes the NFT for the option duration
- NFTs are pooled with other NFTs OF THE SAME COLLECTION
- At staking time, the NFT owner has the option to subscribe to option cover stream
- The option cover stream continously balances the strike to market price differential for the owner
- Ensuring the NFT owner doesn't loose the NFT or has to pay large lump sum, on in-the-money option expiry
- Incentivizing NFT owner to provide their NFTs, improve liquidity and realize financial upside
- Otherwise NFT owner might need to pay lump sum price differential between strike and market price, to keep NFT
- Protocol will automatically distribute the share of option premiums to NFT owners in the collection
- Distributions will happen when the option doesn't expire in-the-money
- Smart Contract defines option details per NFT Collection and stakes NFTs
- Strike Price
- Premium Price
- Duration
- Pricing Oracles will be used to establish Strike Price
- Bonding curves will define strike to premium price for multiple options
- Martket price will be retrieved by Tellor Oracle
- Bonding curves will be used to define premiums
- Smart Contract governs the option expiry and distribution of profit shares to writers or of strike:market price differential to callers
- To distribute the shares of NFT pool's premiums to NFT owners, Superfluid IDA is used
- Ensures gas efficient distribuition of pool shares to multiple addresses
- To create an ongoing option coverage to NFT owner, Superfluid CFA is used
- Provides ongoing balancing of strike to market price differential for option writers, in a sigle transaction.
- Keeper will be used for ongoing stream monitoring and flow rate adjustments within the epoch
- Notional value of single stock options was over 10% higher than spot in 2021
- This trend shows no sign of slowing crypto option platforms, such as LRA Opix and Z are growing
- We see the same happening for NFTs, despite the bear 🧸, the top 10 NFT collections
- Total over 2.5 million E in market cap
- Over 3 million in daily trading on OPC alone
- No team has succeeded yet in finding product market fit and gaining any significant traction.
- The financialization of NFTs is inevitable
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