Community Call Summary August 13, 2021

As we get closer and closer to launching Premia v2 on mainnet, let’s take a moment to focus on where we’re at now.

Trading Competition Summary

If you’d like a full summary of how the trading competition went, check out our Trading Competition Retrospective.

The TLDR is that the trading competition went great. We received a lot of valuable feedback from our users. We learned that the core mechanisms work as expected. The C-Value pricing mechanism proved to work properly but it needs some improvements to properly price the full range of options on Premia. We also learned that we need to provide some failsafes to make sure that liquidity providers aren’t taking on unnecessary risk or having large amounts of collateral under-utilized. To this end, we’ve added a minimum return for LPs on the platform to ensure our LPs are fairly compensated for their risk and collateral.

We saved millions of dollars for our liquidity providers and for our platform by doing proper testing with the community on testnet. We want to thank everyone who participated in the trading competition, provided feedback, and helped us to ensure that Premia v2 will be the best decentralized option protocol possible.

IVOL Oracle

There’s a huge difference between “good enough” and “as good as it gets” when it comes to using volatility to price options. Any new market will require a baseline implied volatility (IVOL) surface to base pricing off of. The further this baseline is from the true unobservable IVOL surface, the costlier it becomes for an option market to converge to fair pricing. This is why we only see option markets from majors such as BTC and ETH in tradfi because in the absence of an IVOL proxy, new market unit economics just don’t make sense.

We’ve solved this through a proprietary IVOL model that will allow Premia to enable option markets with lower than ever liquidity requirements. We’ll be bringing this to market with our mainnet launch and our IVOL model will be made available as a smart contract IVOL Oracle that any protocol can query. We believe this will make the overall DeFi option market more robust and more efficient.

What’s Left To-Do Before Mainnet Launch

The main thing is audits, we are waiting for multiple audits to complete from 2 separate audit teams. We made some incremental improvements to our smart contracts after the trading competition to address issues so we want to ensure we leave no stone unturned in terms of auditing these changes.

We will also be improving our documentation to reflect all our recent changes including changes to the C-Value as well as the implementation of our IVOL Oracle.

When we do launch Premia v2 on mainnet, we’ll be launching with pools capped as $1M per pool for the initial launch. The reason for this is to ensure that all our security guarantees still hold when we move to mainnet. These caps will be raised as the 6 launch pools fill and we see that there’s no unnecessary risk or issues.

The tokens at launch will be the same as the trading competition: WBTC, ETH, LINK, and their respective DAI put pools bringing us to a total of 6 pools at launch.

We’ve also added a pool deposit optimizer, which will allow you to choose which assets you want to deposit, how much you want to deposit in each market, sentiment (bullish, bearish, or neutral), and depending on your sentiment it will show you the best pools for you to swap and deposit your assets into. The recommended swap and deposit path will optimize for the depositor’s future expected return, based on aggregate pool C-values.

Thinking about Layer 2

Layer 2 is a top priority for the team because of the benefits it affords us. Layer 2 enables a higher level of computation at much lower gas prices, so we can do a lot more with users paying a lot less. Some of the things we want to do just wouldn’t be possible on Layer 1 due to gas costs. On Layer 2, we will be able to track data at a per-position level and offer strategies that enable us to do a lot more with our pools and vaults.

Specifically, our vaults are capable of managing balance sheet risk across their entire portfolio on Layer 2. In addition, by calculating the total risk of each pool’s option portfolio, we can efficiently amortize profits and losses across liquidity providers in the pool, enabling a more diversified alternative to the L1 queue liquidity system.

L2 also enables vaults with per-position actions, allowing structured exposures to be created in real-time at negligible gas costs. Further, the additional computation at a lower cost allows us to track per position margins for naked calls and puts to track the risk of each option in real-time. This unlocks more capital efficiency for the DeFi options ecosystem, by allowing options to be lent and borrowed against with a standard money market model.

But the most important and most fun thing about Layer 2 is that it enables us to create a mixed peer2pool and peer2peer marketplace. This will allow traditional order-book market interfaces to leverage existing Premia liquidity, while allowing the Premia v2 AMM to leverage traditional order-book liquidity.

This is a new frontier that we are very excited to be at the forefront of.

In the Near Term, We’re Excited About…

We’re very excited about the future of Premia and where we’re heading. Let’s do a run down of what we’re most excited about.

• Premia v2 launch
• Letting other protocols build on top of our IVOL Oracle
• Improved capital efficiency
• Yield generating vaults
• Layer 2 capabilities

We’re really looking forward to seeing all of this come to fruition very soon and we’re happy to have you all along on our journey.

How You Can Help

You helped us a ton by participating in the tradition competition but there’s a few more things we could really use the community’s help with…

Read the current documentation here and let us know if it makes sense, let us know how you would improve the documentation.

Keep playing with Premia v2 on Rinkeby and play with it on mainnet when we release it and let us know if anything doesn’t make sense or any areas we can improve. The user experience is a top priority for us and we want to hear from you what could make it even better.

Keep asking us questions on Discord, challenge us, question the Premia platform: any and all feedback is welcome!

And last but not least, please help us spread the word about Premia v2 launch. Let your friends know, let the world know: Premia v2 is coming and we will have the best option pricing in the industry.

Thank you all for your continued support. We can’t wait to keep growing with all of you.