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Decentralized NFT Options

Just as in traditional art market ...
... the financialization of NFTs is inevitable

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• In a nutshell
• Concept
• Product
• Technical Implementation
• Business Potential
• License
• Thanks

• NFT holders are not incentivized enough to become option writers, despite the financial upside
• Our goal is to attract NFT holders to become option writers and bootstrap the NFT options economy

• NFT owners can 'write options' on their NFTs
• Option callers can purchase the options, at a given strike price, for a given premium and time
• JPEG X options are european, cash settled
• If the option expires in-the-money, the sequence goes as follows:
  • The NFT holder can provide the strike vs. market price difference to option caller, or
  • Option caller can receive the NFT at option's strike price, or
  • NFT is auctioned off
• If the option doesn't expire in-the-money, option premiums are distributed to NFT owners
• NFT owners are incentivized to gain passive income and provide liquidity
  • NFT is returned to owner, even if the option goes against them
  • Option coverage solution is created to protect the owners from large lump sum expense, at expiry

• Protocol defines strike price and premium pricing options
• Protocol stakes the NFT for the option duration
  • NFTs are pooled with other NFTs OF THE SAME COLLECTION
  • At staking time, the NFT owner has the option to subscribe to option cover stream
    • The option cover stream continously balances the strike to market price differential for the owner
    • Ensuring the NFT owner doesn't loose the NFT or has to pay large lump sum, on in-the-money option expiry
    • Incentivizing NFT owner to provide their NFTs, improve liquidity and realize financial upside
    • Otherwise NFT owner might need to pay lump sum price differential between strike and market price, to keep NFT
• Protocol will automatically distribute the share of option premiums to NFT owners in the collection
  • Distributions will happen when the option doesn't expire in-the-money

• Smart Contract defines option details per NFT Collection and stakes NFTs
  • Strike Price
  • Premium Price
  • Duration
    • Pricing Oracles will be used to establish Strike Price
    • Bonding curves will define strike to premium price for multiple options
• Martket price will be retrieved by Tellor Oracle
• Bonding curves will be used to define premiums
• Smart Contract governs the option expiry and distribution of profit shares to writers or of strike:market price differential to callers
• To distribute the shares of NFT pool's premiums to NFT owners, Superfluid IDA is used
  • Ensures gas efficient distribuition of pool shares to multiple addresses
• To create an ongoing option coverage to NFT owner, Superfluid CFA is used
  • Provides ongoing balancing of strike to market price differential for option writers, in a sigle transaction.
  • Keeper will be used for ongoing stream monitoring and flow rate adjustments within the epoch

• Notional value of single stock options was over 10% higher than spot in 2021
• This trend shows no sign of slowing crypto option platforms, such as LRA Opix and Z are growing
• We see the same happening for NFTs, despite the bear 🧸, the top 10 NFT collections
  • Total over 2.5 million E in market cap
  • Over 3 million in daily trading on OPC alone
  • No team has succeeded yet in finding product market fit and gaining any significant traction.
• The financialization of NFTs is inevitable

Licensed under the MIT License.

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