zubin koticha
@snarkyzk
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BTC maximalist: We built internet money
ETH dapp dev: We put ______ on blockchain
Scalability researcher: We achieved 1000 tx per sec
Privacy researcher: We used SNARKs to obscure tx
Altcoin shill: We made the coin of the future
End User: how do you use any of this...?
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Hey Crypto Twitter,
It's been a while
This one's a tough one...
After the regulatory action against Opyn,
@alexisgauba
and I have made the decision that we are leaving crypto.
This is honestly really emotional for me and Alexis.
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I'm excited to announce a new DeFi primitive called option tokens (oTokens), and the Convexity Protocol, a protocol for fungible ERC20 options in DeFi. These oTokens serve as effective insurance and hedging instruments, and oracles of risk & volatility:
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Derivatives Pricing: An Introduction 🧵
Using probability theory and Black-Scholes to price an ETH^2 contract, aka SQUEETH...
WITHOUT stochastic calculus!
This shit is so cool if you love finance and math like I do!
1/N 👇
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The Options Greeks, in simple terms:
Many options beginners get intimidated by these, but they're quite simple!
As traders, we want to know how our portfolio will react to changes in the market.
The Greeks are just lil' symbols that show how an option's price might change.
1/
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Dinner with Rahul Ligma. Heart goes out to the whole Ligma family.
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I'll skip the usual formalities.
All I have to say is, if you have the chance to work with
@danrobinson
& fam
@paradigm
, take it 😉
We've never been more ready to take on the $300 trillion options market for DeFi.
Watch out Wall Street.
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The $UNI launch is a new paradigm in farming, as now farming will positively impact usage in projects that don't even have a token yet.
See an interesting, new pre-token project? Worth using it now in the off-chance that they have a $UNI-like distribution one day.
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I'm excited to announce that
@opyn_
has teamed up with
@dragonfly_cap
for our $2.16mm Seed fundraise to bring options and risk management to DeFi.
@rleshner
,
@balajis
& others joined Dragonfly's
@tomhschmidt
&
@hosseeb
in Opyn's seed round. 1/
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Why Haven't Crypto Options Markets Grown as much as Perps?
(or: why we're building squeeth
@opyn_
)
Thesis: Crypto options will compete only when they become perpetual
Perp swaps won over futures by killing expiries. No expiries is better UX, so ppl prefer perps to futures.
1/8
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Structured Products: the future of DeFi Options?
Recently,
@opyn_
options &
@ribbonfinance
have seen our volumes & TVL numbers EXPLODE
DeFi options markets are growing fast, and they look different than many of us expected
What's going on here? 👇
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The Political Compass of Cryptocurrencies:
This is true. Don't @ me.
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How to build any AMM curve with Uniswap v3:
In Uni v3, you can create any *static* curve by adding different amounts of liquidity at different price ticks.
But, you can’t create dynamic curves that change *over time*, like Yieldspace.
Or can you?
👇 (idea inspo
@danrobinson
)
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Delta-neutral option quoting, explained:
Options market makers in finance are exposed to lots of risks. One risk is that prices they quote become outdated due to new info.
Delta-neutral quoting is a neat trick traders use to prevent themselves from getting picked off!
1/
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"Anyone who attempts to generate random numbers by deterministic means is, of course, living in a state of sin."
- John von Neumann
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Apparently "S&P 500" is trademarked, so the DeFi community cannot use that term in DeFi applications.
No problem. Just means it’s finally time for $500STONKS token.
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So excited to announce that
@opyn_
v2 is almost here!
Featuring:
🍄 serious 💪 capital efficiency improvements
🍄 trade option spreads & combos
🍄 option auto-exercise at expiry
🍄 formal verification of contracts
🍄 upgradeability to decentralized governance 😉
Can't wait!
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9
75
Introducing: Power Perps & SQUEETH
We
@opyn_
invented a new primitive with
@_Dave__White_
&
@danrobinson
SQUEETH (which is ETH^2) is a huge unlock:
-leverage w.o liquidations!
-no liq. fragmentation, cuz no strikes/expiries
-acts like always at-the-money option
-pure GAMMA
I've been working on a new financial product with
@danrobinson
and the team
@opyn_
: the power perpetual.
If the price of ETH doubles, the ETH^2 power perp 4Xs, the ETH^3 power perp 8Xs, and the ETH^5 power perp 32Xs.
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Options Myth:
When the market is volatile, options are worth more b.c options are more likely to expire in the money.
Yes, it’s true that options gain value in periods of high market volatility. However, the reason is more subtle than the commonly explained reason above.
1/
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A great thing about DeFi is how it's gotten loads of brilliant technologists to increase their financial literacy & understanding
Music to my ears to hear programmer friends chatting market makers, spreads, liquidations in margining, and volatility v. drift of asset prices!
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you just found out the private key to 0x0000000...
what's the first thing you do?
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With me and Alexis leaving, we considered all the possible paths for Opyn.
It became clear that the best would be to give Opyn strong leadership who has huge ambitions for the project.
So we're excited to say that
@andrewjleone
is going to be taking over as ceo of
@opyn_
.
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There's cool new stuff on the horizon, but I'll leave that to Andrew to talk about. But honestly, i'm really excited for the future for opyn.
As for me and Alexis - we got something new for y'all very soon. Details to follow :)
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not everyone in DeFi read the YieldSpace paper, but everyone who did created a new AMM
designing an AMM? read this paper!
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We joined crypto in 2017 because we wanted to build an inclusive, fair, and open financial system.
We spent the last six years working on incredible stuff that would've never been possible in TradFi - cutting edge work on the forefront of structured products and derivatives.
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Options spread trading, in simple terms:
Options beginners are often excited and confused by terms like "bull spread" and "butterfly spread."
These positions are very simple & powerful.
Since spreads are central to
@opyn_
's v2, here's a thread to explain them!
1/
👇
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I’m hearing a lot of ppl say that retroactive airdrops are broken. But I’m not sure…
But is it that retro airdrops that are broken, or is it that retro airdrops that reward Sybil-attacks that are broken?
I think it’s the latter.
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A billi
🎉 Opyn has surpassed 1 BILLION in cumulative notional trading volume and sits just shy of $100m TVL!
1,000,000,000 is a big number, but this is just the beginning.. We're working on some exciting new things, so reaching 10 billion might come sooner than you think 😏 LFG
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Just published a blog outlining the timing assumptions that different PoS blockchains aim to employ. Read to understand more about "synchrony" assumptions in consensus. :D
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The more one studies/trades options, the more one sees optionality & convexity hidden all around us in daily life:
Not being exclusive in a relationship is preserving optionality
Binding college apps are giving up optionality
Founding a startup or buying BTC are long convexity
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We thought we were going to be in crypto for the rest of our lives.
But, unfortunately and unexpectedly, this is the end of the road.
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Great insight into the origin story of
@paradigm
.
The team
@matthuang
&
@FEhrsam
have built is itself proof that the many of the world's smartest are working on crypto, with a superstar cast of
@danrobinson
,
@samczsun
,
@gakonst
,
@arjunblj
,
@_charlienoyes
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Options have exploded in popularity since the start of the pandemic.
The growth has been staggering. Options are now the most popular financial derivative with retail investors.
What is behind the sudden surge in interest?
A thread:
1/
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Proof of Work is a Sybil control mechanism NOT a consensus mechanism. It's Nakamoto consensus, not PoW consensus!
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Andrew is an absolute baller. A MIT-engineer turned Wall St. derivatives trader turned DeFi algo. market maker, he's one of the best in DeFi and has been de-facto like a 3rd cofounder to me and Alexis for a long time.
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most excited for structured products on top of squeeth
wen uni hedging vaults, option hedging vaults, yield strats?
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Great article about how SQUEETH can hedge UNI v3 LPs
but not mentioned is maybe the biggest thing:
SQTH makes options perpetual!
Things MUST be perpetual for them to work well in DeFi. The same is true for options.
That was our guiding problem to solve
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Why we need DeFi:
In our digital era, isn't it weird that not a single big bank began as an internet startup?
Banking's been the same oligopoly for decades.
A thesis:
Big banks are protected by their relationship w/ govt.
DeFi is the most credible threat to this oligopoly
1/
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Nakamoto's longest-chain consensus is novel and secure and an innovative feature of Bitcoin. Proof of Work, on the other hand, stems from the early 1980s, was developed by researcher Cynthia Dwork, and had been previously explored for usage in email spam prevention.
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Making options perpetual is a difficult thing to do cuz options expire. That's a key part of their design!
The first way to make options perpetual was an ingenious way invented by
@ribbonfinance
, built on top of
@opyn_
The second way is squeeth, which we just sent to audit!
2/
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The Greeks can be summed to find a portfolio's total exposure to market forces.
E.g. A 0 delta portfolio implies that the portfolio isn't affected by market moves. A delta < 0 implies the trader has a net short position.
The Greeks thus help traders understand their risks!
7/7
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They call it "free speech" when corporations donate billions to political candidates and buy legislation.
But, they call it "manipulation" when small investors rally behind their favorite meme stonks.
I think they have the labels switched!
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Limit orders = new 0 gas trades!
This new feature
@opyn_
means that you can post orders for 0 gas, and if they get filled, your counterparty, not you, will pay the gas!
🍄 NEW FEATURE: Limit orders on !!
By using limit orders, traders can specify a set price where they are willing to buy or sell options rather than buying or selling based on current market prices
Placing limit orders on is free!
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Proud to support
@sunnya97
,
@valardragon
, 2 of the best builders in the space.
Excited for
@osmosiszone
’s cross chain vision! This is a massively ambitious project.
The Osmosis Foundation just conducted its first ever sale, raising $21M in a strategic round led by
@paradigm
! (number not an accident 😉)
Funds will support the many dev teams and DAOs building Osmosis into the leading DEX in the Interchain!
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Day 3 and we already have people copying squeeth
(1/n) 01’s officially going to mainnet on January 27th 🎉
And we’re excited to offer both Perpetual Futures and the first ever orderbook based Power Perps
#SQUOL
built on
@ProjectSerum
, only on
@solana
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Amazing talk by
@leanthebean
about Zero Knowledge Proofs
@EFDevcon
! Be sure to check out her slides:
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Paradigm has built THE research team of crypto, and chose THE best person to lead it.
Congrats
@danrobinson
- mentor, thinker, werewolf, and the most knowledgeable person in the world on AMM design.
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OpenDoor is the Uniswap/AMM of the housing market!
They give users always-available-liquidity.
This is incredible for assets as complex and non-fungible as houses.
Lesson: convenience, even at the cost of optimal pricing, is something that many people value above all else.
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Now live: a new *fresh* landing page for Opyn🔥
Check it out at
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Gamma - last but not least, my favorite greek, which explains convexity, or the slope of delta.
It is the derivative of delta, expressing how delta changes as the price of the underlying goes up.
This is the most subtle greek, and so I'll explain it in a future tweetstorm!
6/
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Can't believe I'm saying this so soon, but Congrats to everyone who bought WBTC call options on
@opyn_
at a $25,000 strike.
They are now REALLY in the money.
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ct the speed of innovation in defi is just insanity compared to tradfi
just heard from tradfi og, "i wish squeeth had existed in wall st, would solve a lot of problems market makers have with hedging risk"
so bullish on this industry
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Squeeth basically takes options & removes strikes and expiries to create a single ERC20 representing the entire options chain.
Unlike options, SQTH can trade on Uniswap and it can be used as collateral for easy lending/borrowing.
I love options, but these are huge unlocks.
5/
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Can't believe that
@opyn_
v2 is now live! 🍄
Excited to launch the most powerful, capital-efficient DeFi options protocol 🚀🚀🚀
So proud of the team's hard work and can't wait for the community to try it out at
Options marketplace
@opyn_
is rolling out an upgrade that targets capital efficiency and liquidity in the
#DeFi
options market.
@kalrajs23
reports
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Squeeth has a bunch of other cool properties beyond being perpetual.
For example, it gives users leverage w.o liquidations, hedges uniswap LP positions really nicely, can provide the first liquid implied volatility oracle in DeFi, and does other things I'll write about soon!
6/
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why have perps not caught on in a big way in DeFi yet?
compared with traditional margin lending, like
@compoundfinance
,
@MakerDAO
,
@AaveAave
, perps are still small market in DeFi.
what holds them back?
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An interesting difference btwn stocks & crypto is the way in which volatility materializes
Stocks and crypto both tend to crash downwards fast, as we saw today in crypto markets. But only crypto tends to spike upwards in price fast, whereas stocks indices go up more slowly.
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Binance is reducing their withdrawal limit to .5 BTC.
CEX is overrated.
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Just in from sources: When $DOGE hits $1 it becomes the official currency of the City of Miami.
P.S.
@FrancisSuarez
if you RT this, I’ll actually pack my bags and move to Miami tonight.
Had a wonderful dinner w the Founders of
@coinbase
@brian_armstrong
&
@FEhrsam
talking about how Miami can be the most crypto forward city in the country and how many people hold crypto in the US....staggering stuff
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Delta: explains how an option will react if the price of the underlying asset goes up.
A call on BTC is a bet that BTC will go up. The Delta tells us how strong this relationship is, quantitatively!
E.g. A .5 delta means a call goes up $.50 for every $1 increase in BTC.
2/
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Theta: tells us how an option's price changes as time goes by.
All options eventually expire. As they approach expiry, they become less useful & decrease in value. Theta tells us how quickly this decline takes place
E.g. A -.5 theta means an option goes down $.50 every day
3/
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T minus 5 days
lfg²
🐱 ANNOUNCEMENT: Squeeth launch dates!
• Jan 10th - Mainnet Squeeth launch on Ethereum!!
• Jan 24th - Crab strategy launch 🦀
• February / March - Squeeth on L2
One day you're gonna tell everyone you were one of the first to squeeth 😏
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One of the most exciting things about squeeth is the stuff that can be built on top of it
The community has lots of ideas for yield strats, Uniswap LP hedgers, etc
I'm excited to empower teams like
@ribbonfinance
&
@StakeDAOHQ
, and new devs build novel vaults using squeeth!
7/
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.
@sunnya97
and other Cosmos folks must feel really good right now about building a system that can’t be re-org’d
After 4 years of trying, I finally redpilled
@snarkyzk
into Cosmos thanks to
@OsmosisZone
First thing he says after trying IBC: "Holy shit. You NEED safety over liveness."
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Since people asked...
PREREQS for financial derivatives & options math:
- Interest rates & forwards
- Implied volatility
- Risk-neutrality
- Delta hedged portfolio
- Cont. probability
- Gaussians, lognormality
- ABM/GBM & relation to normal/lognormal
- MGFs
- PDEs
Derivatives Pricing: An Introduction 🧵
Using probability theory and Black-Scholes to price an ETH^2 contract, aka SQUEETH...
WITHOUT stochastic calculus!
This shit is so cool if you love finance and math like I do!
1/N 👇
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Vega: explains how an option's price changes as (implied) volatility of the underlying asset changes.
All options go up in value when the market predicts increased future vol. In this thread, I explain this relationship:
4/
Options Myth:
When the market is volatile, options are worth more b.c options are more likely to expire in the money.
Yes, it’s true that options gain value in periods of high market volatility. However, the reason is more subtle than the commonly explained reason above.
1/
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Hit me up if you’re in Miami and want to chat about DeFi, options, or AMMs!
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Buying your first Bitcoin in 2011: "wow I can't wait to destroy US dollars with this"
Buying your first Bitcoin in 2018: "wow I can't wait to make US dollars with this"
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DeFi is a massive group effort, and this paper is no exception: we especially appreciate the help we got from
@rleshner
& the
@compoundfinance
team, as well as the help from
@danrobinson
. The paper was heavily inspired by
@compoundfinance
,
@MakerDAO
, & the Yield Protocol.
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