Since releasing the initial polarized DeFi token model mechanism we received the following feedback from our community:
The logic is too complex. This is due to having long and short on both the CALL and PUT token products, essentially creating two layers of logic.
Why are you launching the ETH PUT option product before the CALL option product?
If the funding fee is always paid by long token holders there is little incentive to hold the long token side essentially reducing the potential userbase.
This made us think, how can we simplify the polarized token model even more…
Introducing AntiMatter v1
- Release date set for before 1st of April
- The initial perpetual ETH option product will include both CALL and PUT options.
- CALL and PUT products put into one product. Dual token model instead of the 4 different short and long tokens in the previous model.
- No funding fees, token equilibrium is achieved by market-makers and arbitragers.
- Docking container for collateral — possibility to deposit several different types of stablecoins as collateral for minting the underlying option asset at the same time.
Each perpetual option AntiMatter product has one underlying asset (ETH, wBTC..) and two parameters: option price floor and option price ceiling.
Let’s take ETH as an example: We can create an option with parameters of 1000 USD as floor price and 2000 USD ceiling price. Our product is now called ETH(1000–2000).
- The CALL token for this option always gives the right to purchase ETH at 1000 USD.
- The PUT token for this option always gives the right to sell ETH at 2000 USD.
If ETH is trading at $1500 then the CALL token holder can use this CALL token to purchase ETH at $1000 making a $500 profit.
Conversely, the PUT token holders can use the PUT token right to sell ETH at 2000 and purchase back ETH at 1500, making 500 USD profit.
Let's see an example of how this is going to work in practice with the ETH(1000–2000) product from above.
ETH is trading at $1400, Jonny thinks ETH is going to increase in value. He purchases 1 ETH CALL option token for $1400–$1000 = $400
ETH rises to $1900, Jonny was right. His 1 CALL option contract is now worth $1900–$1000 = $900. While ETH went from $1400->$1900 (35.7% increase), Jonny’s CALL token increased from $400->$900 (125% increase). As we can see from this example the leverage ratio is dynamic based on the instrument price and option floor/celling price.
Jonny decides to hold his CALL token as he thinks ETH is going to $2000. Jonny is wrong as the ETH price decreases to $1300. His CALL token is now worth $1300–$1000 = $300, meaning Jonny is currently $100 underwater from his original entry.
At the same time when ETH was trading at $1900, Chad decides to open a PUT position to hedge his ETH exposure. He purchases 1 PUT option token for $2000–$1900 = $100.
Chad’s ETH hedge worked out. His 1 PUT option token is now worth $2000–$1300 = $700, a 700% profit.
It’s worth noting that in our example the maximum price range $ETH can trade at is between $1000-$2000. If ETH trades outside these ranges, one of the option tokens will be worth 0.
As from the example above, leverage is dynamic and will depend on the price of the product and the price of the option token.
Leverage of CALL = Price of underlying asset / Price of CALL
Leverage of PUT = Price of underlying asset / Price of PUT
For the previous example, we can see that CALL for the ETH($1000-$2000) product has the following dynamic leverage.
In simple terms: Lower option price equals higher leverage.
Option creation and redemption
To execute a call/put strategy it’s normally sufficient to buy the corresponding token from the open market. There is however also the possibility to generate and redeem option pairs.
- To generate a set of option tokens (CALL & PUT) you deposit 1000 USD worth of collateral.
- To redeem a CALL token for ETH you deposit 1000 USD worth of collateral and the CALL token. CALL token gets burned and you receive 1 ETH from the underlying asset pool.
- To redeem a PUT token for USD you can deposit 1 ETH and the PUT token. PUT token gets burned and you receive 2000 USD from the underlying asset pool.
Arbitrage opportunities will make sure the creation and redemption balance equation always holds. If the aggregate price of call and put tokens exceed the redemption payout, then market makers will create more option tokens to supply the market.
Price peg and maintenance
To peg the underlying asset (ETH) for CALL and PUT tokens the underlying asset pool is going to partially consist of ETH and partially of stablecoins.
The ratio of ETH vs stablecoins in the pool is based on the number of CALL and PUT tokens circulating. If the CALL to PUT token ratio is 2:1, then the ETH to stablecoin ratio in the underlying assets pool is also going to be 2:1.
By creating and maintaining a dynamic split asset pool the CALL and PUT tokens are pegged with the underlying assets thus reflecting their movement.
The underlying assets in the option pool will be purchased and sold into maintaining the ratio and the total value — just like the current Uniswap LP pool model.
Stablecoin docking container
AntiMatter will support different types of stablecoins such as DAI, USDC, USDT, PAX, USDT, 3CRV, etc. The option creator can choose to deposit one or more assets together and the Antimatter container will sort out the assets with the correct underlying ratio.
The AntiMatter v1 model does not require a liquidation mechanism. The minimum price each token can go to is 0. However, a liquidation event will never occur as the price of the underlying asset might still re-enter the product range giving the token holder the right to buy or sell the asset in the future.
Governance and future products
In the future, it will be possible for governance to vote on new product launches and their properties. If there is enough demand AntiMatter will expand to other assets beyond ETH and wBTC such as UNI, SUSHI etc.