Demystifying Options in DeFi: A Deep Dive by Panoptic | ETHDenver 2023

In this informative video, Jesper Kristensen from Panoptic delves into the fascinating world of derivatives infrastructure in the frontier of DeFi. Join us as we explore the four essential pillars that form a robust financial ecosystem: fixed income, equities, futures, and options. Options, in particular, hold immense significance as they can be built upon the foundation of these pillars to enhance capital efficiency and facilitate intricate hedging strategies for risk diversification. However, navigating the current state of options in crypto and DeFi presents its fair share of challenges. Stay tuned to gain valuable insights into this dynamic landscape and discover potential solutions to overcome these obstacles. #DeFi #DerivativesInfrastructure #buidl #buidling #buidlweek
TLDR: Panoptic aims to solve liquidity and technical challenges in options trading in DeFi by integrating options with the DeFi ecosystem, leading to increased participation and a modular approach.
00:00 🔑 Panoptic aims to solve the lack of liquidity and technical challenges in options trading in DeFi by unlocking existing funds and integrating options with the DeFi ecosystem, leading to increased participation and a modular approach.
04:01 📊 Panoptic allows anyone to create permissionless pools on Uniswap, representing option positions as ERC 1155 tokens, providing better risk-reward profiles for LPs and expanding the DeFi ecosystem.
08:26 🔍 Implementing decentralized liquidation networks and leveraged options in DeFi, allowing users to protect their positions and take advantage of specific payoff profiles.
10:09 📚 The buyer borrows LP tokens, converts them to USDC, and holds 2500 USDC, with the payoff being zero if the price is above a certain range, while the seller's position is determined by the strike price, allowing the buyer to close their position and exercise their option by swapping 1 ETH for 1000 USDC, resulting in 1500 USDC profit for the buyer and 1 ETH for the seller.
13:39 🔍 Panoptic is developing an options product that allows users to deposit liquidity and trade puts and calls, with plans to expand to any token and provide more details on Twitter, launching on testnet in a few months and on mainnet later this year, while demonstrating adjustments to time scale and features in Unit Swap liquidity pools.
16:52 📝 The speaker discusses different strategy templates and chooses a long put, demonstrates customizing payoff curves using Panoptic, explains creating and minting positions in DeFi, and invites viewers to learn more and ask questions, mentioning an upcoming event.
20:21 🔍 Panoptic provides liquidity providers with higher fees and a better risk-reward profile, while ensuring reliable option pricing data in decentralized exchanges.
24:46 💡 Integrating options into the existing DeFi ecosystem is a powerful idea for accessing liquidity.

[@pjy94]

super cool

[@giuseppezieme8942]

Nice, thanks

[@cryptojesperk]

Thanks for watching! 🙏

[@satnawk5328]

this is so cool!!

[@sensational6991]

If you are from C4, link up💀

[@onemonsterceo]

Wouldn't the LPs want to rebalance while the option buyers are ITM?

[@cryptojesperk]

Which LPs are you referring to here? Do you mean the seller would want to rebalance if the buyer is ITM? The seller can close their position if they want to and sell at another strike - is that what you mean?

[@onemonsterceo]

@@cryptojesperk when the options are ITM, the LP wouldn't earn any trading fees since their Univ3 position will be out of range. Why would they keep it out of range for the sake of the borrower?

[@cryptojesperk]

​@@onemonsterceo Got it. Yes, this is something we have planned to test out during the beta launch. We can go with either design, but no-rate is what we believe will work as of now. Btw. the seller has a way out via force exercising the buyer's position. We are going to test out how this works. We will incorporate aa more thorough answer into our docs.

[@onemonsterceo]

@@cryptojesperk I mean, we have to see how this plays out but people who LP on UniV3 are usually the smartest players in crypto who actively adjust their position. Less sophisticated LPs use something like Gamma protocol which also actively adjusts the position to maximize trading fees. If force exercising is available, force exercising will be the norm.

[@cryptojesperk]

@@onemonsterceo Yes, exactly. That's why only being able to sell short puts (current situation) is not great and ofc they know that. Panoptic enables buying and selling puts and calls (much broader market). And yes, actively managing your position (just like now) is a good idea in some cases!