Although Opyn joined DeFi with an insurance-like product such as Compound’s COMP for governance tokens, its focus has since moved to the digital asset space options market. The pivot is guided both by user interest and the kind of obstacles DeFi currently faces, according to Zubin Koticha, co-founder of Opyn.
“The biggest issue with DeFi is that [in] traditional finance, you don’t need super over-collateralization,” Koticha said. He added that various capital needs often chew into the competitiveness of DeFi with traditional finance.
Simply put, options are financial contracts which offer users the right to buy or sell an underlying instrument on or before a certain date at a predetermined price. Options enable traders to bet on the potential bullish or bearish nature of the market, depending on what they think of market trends. While options in traditional finance have long existed, they are relatively new to the crypto space and therefore come with their own obstacles.
According to Opyn, the upgrade would bring to the options marketplace a variety of potential functionality, including cash settlement for options without the need to swap underlying assets, the opportunity to use yield-earning assets as option collateral, and option margin improvements.
“We changed our system from physical settlement to cash settlement,” Koticha said. Noting that while traditional markets still meet the need to resolve physical product options such as grain, he said there is no such need for physical delivery in the crypto space and hence no need for the asset to be actually traded. Instead, it wants to offer just the difference in costs. Instead, it wants to offer just the difference in costs. Although the ultimate thrust of Opyn’s changes is based on added efficiencies in how DeFi manages capital, the changes are just part of the pipeline upgrades. Koticha said Opyn is also plotting an update to the protocol that will bring the features together to net short and long options, thereby freeing up further capital.