An Optimistic Journey Into The Void
Time to go where no one else is looking.
It is time to make a roundup of what is taking place in the Optimism ecosystem after focusing mainly on Arbitrum. While I remain an Arbitrum bull, a wise man once said “don’t marry your own bags” so expanding your horizons and putting things on the radar will do you no harm.
Undoubtedly, the token incentives that followed the release of the OP token helped attract developers to build on the chain (more on this later).
Right now Velodrome is the protocol that has emerged as an Optimism giant along with Synthetix and Perpetual Protocol silently following the same direction. However, outside of these protocols, the noise rarely breaks through the void, leaving the average crypto enjoyor unaware of what is going on at Optimism, so let’s take a deeper look into protocols that are building and worth putting on your radar.
What’s going on at Optimism?
Thales is a decentralized parimutuel market which means that you bet that a certain outcome will take place regarding token price action. Similar to an options contract. However, whereas an options writer still makes a small financial gain for selling the option if the strike price is hit, parimutuel markets are zero-sum and all of the collateral is placed in a shared pool that is distributed to the winners of the directional bet.
Thales brought this concept on-chain and enabled the creation of a market for any asset through oracles. The platform and have positional markets if a strike price is hit and directional if a token stays within a certain range.
Thanks to the chad that is Majin Bobo for putting me onto this project.
Teahouse Finance is an asset management protocol that offers different yield strategies through its vaults. It is built in similar ways to protocols that offer yield strategies on top of GMXs GLP and have recently released a vault strategy that features concentrated liquidity on top of Perpetual Protocol. In order to access the vault you would normally need a Teahouse Hightable NFT to be whitelisted but the recent perpetual protocol vault has been made open for the public.
The parameters that need to be factored in when entering the vaults are that there are platform fees of 0.1% to enter and 0.2% to exit.
The management fee is 1.7% APY for Teahouse using the exit value and a 10% performance fee based on profits made.
Overtime Markets is an on-chain sports betting platform that facilitates betting on multiple sports leagues through the use of their sports AMM which uses on-demand liquidity to act as a market maker for the bets.
The protocol provides markets for Football (soccer), American Football, Basketball, Baseball, Hockey, MMA, and Motorsports. Different leagues are covered within these sports, giving you a wide variety of positions to choose from. Instant payouts are guaranteed after the games have been resolved.
If you don’t trust your betting skills there are vaults available on the platform that executes certain strategies for you in case you want to outsource the brain power. Overall, Overtime is doing its part in bringing a huge sports betting market on-chain.
Sonne Finance is a permissionless lending protocol on Optimism. The platform offers money markets for wETH, USDC, USDT, DAI, OP, sUSD, wBTC, and SNX. Sonne uses Velodrome in their token strategy as they don’t simply reward liquidity providers with SONNE tokens. Instead, they bribe VELO holders with the SONNE token to vote for the SONNE/USDC pair, and the users that stake the SONNE token received VELO rewards instead. Flywheel effect at its finest.
The protocol makes money by taking a cut on the borrower interest that is paid on open positions which are determined by the “reserve factor”. To abide by proper risk management, stablecoins and highly liquid assets such as USDC have a higher collateral factor than a token such as SNX.
Lyra is a decentralized options exchange that resides on Optimism. The protocol uses the Black Scholes model to price their options but also factors in volatility smiles as the implied volatility across different strike prices is inherently different.
The Lyra AMM allows users to withdraw and deposit funds at any time after an initial 3-day cooldown. It aims to always stay Delta Neutral to ensure that the trading is driven by implied volatility market making.
The protocol also released its Newport upgrade which is an option AMM that can be integrated into other perpetual exchanges. It features collateral management that is partially collateralized by cash when it’s hedging against short positions. Lyra has announced plans to integrate this feature with GMX.
Kwenta is a decentralized derivatives platform that allows you to trade synthetic real-world assets. For people that like to trade synthetic currencies such as Euro, USD, and the Indian Rupee, then it might be of interest to you. It used to allow futures trading of precious metals such as gold and silver but these markets have been paused for the time being.
The protocol uses Chainlink oracles and Synthetix price oracles to retrieve reliable price updates consistently.
Kwenta offers both cross-margin and isolated markets based on user preference (your collateral can be used on all markets or you have to deposit and withdraw for every market).
Notable protocol updates
Velodrome reaching an all-time high in TVL and growing substantially Slappjakke’s thread is well worth a read.
How will Optimism deal with the quest finishing?
Optimism was incentivizing their growth with quests that rewarded users and developers with OP tokens. With the quests finalized last week, it is clear that there has been a sharp decline in addresses transacting on the chain and new contracts being deployed, which can be deemed problematic for the ecosystem.
How the team behind the ecosystem reacts to this will be interesting to follow, considering their direct competitor Arbitrum is going strong without using token incentives (yet). Nonetheless, Optimism will have to act as the protocols in the ecosystem will bear the brunt otherwise.
I will continue to try to give you a solid overview of what is happening within different ecosystems, especially as it widens with the eventual release of protocols on zkSync, Starknet, and Fuel that will put you in a position to capitalize on rotations when they take place.
Well done if you managed to congest all that information, I hope you enjoyed the post. Don’t forget that you are more than welcome to leave feedback or drop any questions in the comment section.
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Disclaimer: All Content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing on the site constitutes professional and/or financial advice, nor does any information on the site constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. I am just a random degenerate sensei sharing an opinion.
Thanks for the write up Sensei :)