Optyn Integrates Chainlink Price Feeds to Secure Its Polygon-Based Options Protocol and Synthetic Assets
Optyn, a runner-up prize winner at the 2021 Spring Chainlink Virtual Hackathon, is excited to announce our successful integration of Chainlink Price Feeds to accurately price options contracts and synthetic assets created, traded, and settled on our Polygon-based DeFi protocol. Through Chainlink’s industry-standard oracle network, users can now leverage Polygon’s high-throughput platform to create secure, low-cost option contracts backed by up-to-date price reference data across a variety of assets.
Our integration supports the entire suite of Chainlink Price Feeds currently available on Polygon. We selected Chainlink as our go-to oracle solution because it provides hundreds of pre-made decentralised oracle networks that are time-tested in production, securing tens of billions of dollars for leading DeFi projects. Chainlink Price Feeds source price data from high-quality data providers with broad market coverage and have a strong reputation for uptime even during periods of extreme volatility, heavy network congestion, and infrastructure outages.
What is the Optyn Protocol?
Optyn is an options market and synthetic asset protocol built directly on Polygon, enabling users to get exposure to synthetic assets and create options contracts. Market participants use options for a variety of reasons:
- Hedging and risk management: users can reduce the impact of price fluctuations on their portfolio.
- Short exposure: traders can bet against an asset’s performance even if they don’t hold the asset.
- Leverage: traders can enter positions that are larger than their account balance.
Options have only recently become more popular with retail DeFi traders, but they have been around for hundreds of years and are commonly used by financial institutions in traditional markets.
Option Markets for Any Chainlink Price Oracle
Optyn protocol allows option markets to be created around any Chainlink Price Feed oracle and collateralized with any ERC-20 token. Users can leverage Optyn to create secure options markets around a variety of asset types, with a few examples included for each (but not limited to):
- Cryptocurrencies: BTC, ETH, LTC, XRP
- ERC-20 tokens: BNB, UNI, SUSHI
- Forex: GBP, AUD, CHF, EUR, CNY, JPY, KRW
- Indices: FTSE, Nikkei, Total crypto market cap
- Commodities: Gold, silver, oil
- Stocks: Tesla, Apple, Amazon
- Any future oracle created: eg. Weather
With Optyn, any ERC-20 asset can be used as collateral for an option market. When trading off-chain assets, such as stocks or commodities, a corresponding synthetic ERC-20 token is needed to trade these assets on-chain. If a synthetic token representing the off-chain asset doesn’t already exist, Optyn will create it, so long as a Chainlink Price Feed exists for it. Each market has a corresponding liquidity pool in a swap protocol with a pair that includes the underlying asset and a hedge asset.
Delta hedging refers to a strategy options protocols use to remain directionally neutral by buying and selling the underlying asset. Optyn achieves this buying and selling the underlying asset in the corresponding liquidity pool. This protects the pool against large price movements so liquidity providers can reliably collect contract premiums without massive drawdowns.
Synthetic ERC-20 Tokens
For the protocol to be successful, it’s essential to minimise the liquidity pool exposure to price movements in the underlying asset. Where there are existing ERC-20 assets that correlate to a price oracle, then we can use those to mitigate risks accompanied by asset fluctuation.
However, some assets are not represented on-chain as an ERC-20 token. Without such an asset, the protocol cannot effectively hedge against price movements. For these, we will create an ERC-20 token whose price tracks the corresponding Chainlink Price Feed oracle.
Since these assets don’t currently exist, we are creating them because we need them. However, we expect them to be in extremely high demand by other protocols and users for hedging, risk management and trading as DeFi goes mainstream.
Why We Selected Chainlink
Chainlink was selected as our oracle provider because their decentralised oracle network aligns well with our overall belief of centralised finance being disrupted by decentralised protocols over the next few years. For decentralised finance to become successful, protocol developers need assets and risk management tools for both on-chain and off-chain assets, including infrastructure like Chainlink Price Feeds.
Optyn uses Chainlink to price options contracts and synthetic assets, which is important for minting new positions, swapping contracts/assets, settling contracts at expiry, calculating health factors, and managing the liquidation mechanism, all in accordance with the most up-to-date, fair-market exchange rates as aggregated across all global markets.
Some of the important features of Chainlink Price Feeds include:
- High-Quality Data — Chainlink Price Feeds source data from numerous premium data aggregators, leading to price data that’s aggregated from hundreds of exchanges, weighted by volume, and cleaned from outliers and wash trading. Chainlink’s data aggregation model generates accurate global market prices that are resistant to API downtime, flash crash outliers, and data manipulation attacks like flash loans.
- Secure Node Operators — Chainlink Price Feeds are secured by independent, security-reviewed, and Sybil-resistant oracle nodes run by leading blockchain DevOps teams, data providers, and traditional enterprises. Chainlink nodes have a strong track record for reliability, even during high gas prices and infrastructure outages.
- Decentralised Network — Chainlink Price Feeds are decentralised at the data source, oracle node, and oracle network levels, generating strong protections against downtime and tampering by either the data provider or oracle network.
- Reputation — Chainlink provides a robust reputation framework and set of on-chain monitoring tools that allow users to independently verify the historical performance of node operators and oracle networks, as well as check the real-time prices being offered.
“Optyn chose Chainlink Price Feeds as its oracle solution because they offer ready-made, live in production decentralised price oracles that provide high-quality data feeds in a provably secure manner natively on Polygon. This enables Optyn to price a variety of assets, such as cryptocurrencies, forex, market indices, commodities, and more.” stated Danny Dorito, Founder of Optyn.
Go to https://optyn.co and start trading options on the Polygon mainnet now.
Learn More/About Optyn
Chainlink is the industry standard oracle network for powering hybrid smart contracts. Chainlink Decentralized Oracle Networks provide developers with the largest collection of high-quality data sources and secure off-chain computations to expand the capabilities of smart contracts on any blockchain. Managed by a global, decentralized community, Chainlink currently secures billions of dollars in value for smart contracts across decentralized finance (DeFi), insurance, gaming, and other major industries.
Chainlink is trusted by hundreds of organizations, from global enterprises to projects at the forefront of the blockchain economy, to deliver definitive truth via secure, reliable oracle networks. To learn more, visit chain.link, read the Chainlink 2.0 whitepaper, subscribe to the Chainlink newsletter, and follow @chainlink on Twitter.