This article was first published on 0x Blog - Medium
Exploring the 0x DeFi ecosystem 🪐
Credit to co-authors Wade Prospere [Opyn] & Clay Robbins [0x Labs]
Opyn is a capital-efficient DeFi options trading protocol that allows users to buy, sell, and create Ethereum-based options. DeFi users and products rely on Opyn’s smart contracts and interface to hedge themselves against DeFi risks or take speculative positions on different cryptocurrencies. Opyn uses 0x’s unique off-chain relay, on-chain settlement architecture, to offer free limit orders to its users.
- Options are derivatives contracts that give the buyer the right, but not the obligation, to buy or sell a fixed amount of an underlying asset at a fixed price on a specific date (for European options).
- People use options primarily for income generation, speculation, and hedging:
» DeFi traders use options as a risk-hedging tool (i.e., limits downside losses on declining asset prices).
» Speculators use options to gain low-cost, leveraged directional exposure with limited downside risk.
» Income seekers use options for recurring yield/income generation.
- Options are different from other derivative contracts (forwards, futures, etc.) in that with any options trade, the holder has the right, but not the obligation, to exercise their contract.
How users benefit from Opyn’s integration with 0x
Opyn users benefit from 0x protocol’s unique off-chain relay, on-chain settlement architecture, which makes free limit orders possible.
Placing limit orders is free on Opyn.co due to the following reasons:
- Limit orders are created and submitted off-chain to 0x Mesh, which broadcasts limit orders across the entire 0x network to be filled. This does not require any Ethereum gas.
- When limit orders fill, the transaction settles on-chain, and the taker of the order pays for the transaction’s Ethereum gas fee + 0x protocol fee.
Users on Opyn can set limit orders to expire in any duration, be it 30 seconds, ...
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0x Blog - Medium