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Motivations for Development of the Valorem Options Protocol

Mar 28th, 2021
1 min read time
@0xAlcibiades
@0xAlcibiades

A few months back, I wanted to write physically settled covered call options on ycrvSTETH. After doing some digging, I realized that there wasn’t a permissionless, oracle free protocol out there which would let me write options on any ERC-20 asset pair, to be physically settled, at a strike price of my choosing. That sent me down a design rabbit hole. I set out with the goal of building an efficient settlement layer for fully collateralized options on any ERC-20 pair.

Sure, there were a lot of options out there, Lyra, Dopex, Opyn. All of them seemed to have constraints around oracles. After a few days of thinking, I had it: Valorem Options V1, a DeFi money lego enabling writing covered call and covered put, physically settled, traditional or exotic options. The idea used a VRF random number per unique option type for fair settlement. With options contracts are issued as fungible ERC-1155 tokens, with each token representing a contract; and option writers are additionally issued an ERC-1155 NFT representing a lot of contracts written for claiming collateral and exercise assignment. Now burdened with the idea, I came up with the budget and how long it would take to build a well tested and secure implementation with a frontend, and had to put the thought on hold.

Last month, I had the opportunity to attend, and hack at, ETH Denver. While there, I had the good fortune of meeting and speaking with a few folks that put the ball in motion again. Adrian Robison from Harmony and Amadeo Brands. Adrian helped us line up a $50k launch grant from Harmony to get building; and Amadeo contributed capital, expertise, his network to help move the project forward.

After 2 weeks of building, we are now about a week away from a testnet launch on the Harmony blockchain, and about 4 weeks away from a mainnet launch of the settlement layer, which you can learn more about here. It’s still early days, and there is a ton we are excited to build on this new, permissionless options settlement layer.

Much more to come.

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