The bull case for Dopex

Have you ever seen a creation so full of splendour?

Dopex is an on-chain options protocol.

Compared to Options in TradFi, on-chain alternatives are very early.

So what exactly are options? Let’s take a looking at Dopex’s flagship product:

SSOVs (single staking options vaults)

SSOVs allow users to lock up tokens for a defined period of time and earn yield. These assets are then deposited into a contract that sells your deposits as call options to buy the underlying assets at the strike price (a pre-agreed price) to buyers at end of month expiries. Call options = you belive numba go up and put options = numba go down.

In practice, it looks something like:

1. At the beginning of each epoch (monthly or weekly deposit), users must lock tokens in an SSOV. When they deposit the underlying asset they also select the strike prices that they wish to collect yield on. 

2. The vault then sells calls to buyers at those strike prices, those that buy call options pay the writer a premium, this is also deposited to earn yield.

3. At expiration if the expiry price of the underlying asset < strike price, then the asset is returned to you + the premium collected from selling calls. 

4. However, if the strike price > expiry price + your premium the buyer gets the portion of your tokens above the strike price. (You’re basically selling the upside of the underlying token to another party // above the strike price you no longer have exposure to the token and would need to buy it again on the market)

Atlantic Options

Atlantic Options are a more capital-efficient type of options. Currently, there are two types: 

1. European Options: An option which gives buyer a chance to exercise the contract only at the expiry date

• American Options: An option which gives buyer a chance to exercise the contract anytime prior to the expiry date

How are Atlantic Options revolutionary? Tommy buys a put option with a strike of $2k per Ethereum at the current price of $2.4k, however, at some point ETH drops to $1.5k before expiry he can’t realise his profits - this is annoying and capital inefficient. 

AOs fix this by allowing the underlying collateral to be used by depositing the token through moving it out and back into the position before its expiry date. This opens up the possibility of capital being used to farm, sell puts, borrowing or even no liquidation perps.  

Moreover, these smart contracts are written with a pre-defined set of criteria that prevents the user from defaulting on borrowed funds by not repaying.

Want to learn about how how Atlantic Options can be used for no-liquidation perps and to stop your positions from going to

then check out this video from 0xsaitama.

IRO Options

Dopex IROs provide a fascinating new game theoretic approach to playing the Curve wars. Their vaults allow market participants to purchase/ write options (speculate on) for Curve gauge reward APYs bringing an entirely new dynamic into the space. 

Dopex’s IROs offer the same but for annualized rates on CRV gauge rewards but for IROs, these are bought based on USD notional amounts rather than ‘n’ calls/ puts. For our nerds, the math is here:

A very simple breakdown of this is assume you have a Curve pool with 8% APR and $1m of weekly IR calls. If at the end of the week the APR shifts to 10% You’d receive a profit from this of $234, not a great ROI from a 2% increase in price right? Now imagine the same but leveraged up 100-1000x! DAOs can also use this to fix their yield too by underwriting their rate option strategy with 0.2-1% of their capital to write against their LP position. 

Fees from IROs are generated on the Notional not TVL so a 50m TVL results in a 500m Notional at 100x leverage, where buyers pay 0.01% in fees. This is $500k in weekly fees, from one product, which is more profitable than your Makers, AAVEs or Curve. These fees get paid to veDPX holders. 

Atlantic Straddles

An Atlantic Straddle is a tool that Users can use to purchase a 1-Click Straddle Strategy in order to bet on the volatility of a certain asset. These straddles expire at a pre-determined expiry date.

With Atlantic Straddles (AS) you effectively bet on volatility.

Writing AS means you're betting on low volatility, while buying AS means you're betting on high volatility. Of course, if you write ASs and there’s high volatility then you will lose out but Dopex are developing products to hedge against this. 

With Atlantics, you only need to buy an Atlantic Put (AP) and use the stablecoin collateral to purchase the underlying to generate the same exposure.

Imagine a long straddle with a strike price of $1500, you break even if price moves by 11.04% in either direction and profit if it moves more. Who wouldn’t want to bet on volatility? No one it seems, as the first epoch sold out in less than 7 minutes. 

rDPX v2

The original purpose for $rDPX was for it to be used as a rebate token which would be minted when option writers incurred losses, this would allow Dopex to provide options at more competitive prices compared to competitors.

In order to give $rDPX some added utility, it was designed to be used as collateral to mint synthetic assets similar to @Synthetix_io, this will allow users to trade stocks, commodities or other synthetic assets on Dopex where $rDPX would be the collateral used to mint. 

V2 brings in $DPXUSD. Rather than top up collateral by minting $rDPX and increasing supply, holders can now bond $rDPX for $DPXUSD at a 5% premium whilst the $rDPX supply is burnt. 

The same also applies on your way out, if you wish to sell $rDPX just bond it for $DPXUSD and take back into your bank account. The resulting game theory, assuming everyone is knowledgable about v2 is that there is no reason to sell, you get a 5% discount, $rDPX is constantly burnt until it reaches zero. I’m sure you’re all aware of the relationship between supply/demand and price. 

Assuming all players are aware of this process, I'd argue that essentially no one -rational- would sell. Instead, they'd burn $rDPX and mint DPXUSD. 

So you'd get a situation where there are no$rDPX sellers, with a constantly declining supply. Oh, and some simulations from the Dopex discord!

This is all on Dopex for now, if you’ve made it this far, congragulations you’re gmi