Create a Thetanuts AMO to provide liquidity directly to Thetanuts’ options vaults.
Thetanuts is a multi-chain crypto derivatives platform, offering organic yield opportunities for users and daos alike to earn sustainable returns. Options markets are still in their infancy with only $1 billion in TVL while spot dex’s have nearly $70 billion in TVL. In traditional markets, derivatives such as options are anywhere between 8x-20x more liquid than their spot counterparts. There will be several catalysts needed for the same to happen with options markets in DeFi, but one necessary component will be having sufficient liquidity. Frax is in a unique position to supply the capital necessary for Thetanuts’ vaults given its proven record of stability, cooperation, and innovating protocol design. A collaboration with Thetanuts would lead to increased demand for Frax while improving the TVL of Thetanuts.
In this collaboration, Frax will be deployed in Thetanuts version one index product to sell a variety of puts (example, eth puts and wbtc puts) that aggregate to a single index token. This enables Frax holders to generate outsized risk adjusted base yields in Frax, resulting from top market makers such as Alameda, QCP Capital, Ledgerprime, Genesis, GSR, and Wintermute actively participating in Thetanuts option vaults.
|||Cumulative Return (%)|
|Thetanuts v1 ETH Puts Index (green) |50.6|
|Thetanuts v0 (Blue)|30.1||
|DeFi option vault 2% AUM fee 10% performance fee (red) |22.1||
This product differentiates Thetanuts from its peers and benefits Frax holders because:
- Thetanuts creates a high yield risk adjusted scenario estimated at ~50% for 2021 via its index because users are no longer seeing their risk concentrated on a single strike and tenor. This can be observed from the back test.
- Thetanuts does not take fees on its base vaults. This ensures that Frax holders continue to receive the highest base yield in the DeFi options space.
- Thetanuts index product will be multichain unlike current defi option vaults which are available for access only on their source chain creating a superior user experience.
Additionally as the collaboration grows, Frax will gain traction as a standard for settlement in the dealing of financial derivatives. Thetanuts benefits as it is able to build out a comprehensive options market by having vaults on varying strikes and tenors for various assets. This would be a critical step in creating a full service decentralized options trading platform. For these reasons, a collaboration between Frax and Thetanuts will be mutually fruitful.
Create a Thetanuts AMO and authorize up to $10m of liqudiity for use in the AMO.
For: Create the Thetanuts AMO
Against: Do nothing