Name of Project
Margins against wallet holdings (perhaps using the NFT standard?)
Ticker for Token
1) In one sentences or less, describe your token. This isn’t the time to get wordy, just to the point!
Creating an NFT-like “unique” representation of a Wallet that is minted by a dAPP, which utility token will be $WALLIE
2) Do you have a video to introduce yourself or explain the token? Upload it here and share the link here. (Not required)
3) Do you have a logo for your token? If so, upload it here. (Not required)
4) How does your token work? Be as detailed as possible
I manage a few wallets that are relatively significant in value, holding a bunch of different tokens of varying qualities and/or market cap. From Opyn to various different DEX derivatives platforms need either a stable coin collateral for selling (secured) puts or the underlying itself for selling covered calls.
Say I want to sell covered calls against 10 ETH, even if I have 1 WBTC (which is currently over 4X the value of 10 ETH) I cannot because I need to have 10 ETH minus the premium I received in ETH. This is simply ridiculous. The reason for this situation is there is no way to collateralise the wallet holdings and secure margins against it, preferably in a dynamic manner.
I mean dynamic in the sense that one should be able to spend the WBTC without any issue as long as some other quality acceptable holding(s) in the same wallet, other than the initial WBTC, is/are able to act as collateral for margin purposes for the sold ETH covered calls.
Wallet 1 has 2 ETH, 1 WBTC, 1.5 YFI, plus some blue chip quality tokens
Wallet 1 holder wants to sell 10 ETH worth of covered calls. The holder cannot, not even with a centralised entity. Not even with WBTC! The holder is forced to have 10 ETH, by buying some or converting other holdings to ETH so that the wallet has 10 ETH at least to be able to write/sell the covered calls. Practically this is atrocious and is an overkill.
If we can collateralise the wallet holdings and provide margin, say after a safety buffer “hair cut” based on volatility and market cap of the assets, against it decentralised derivatives (particularly options) will really flower.
In the above example of Wallet 1, both WBTC and YFI are pretty good quality assets and say the hari cut is determined to be 20% and 30% respectively. The wallet will get a margin of:
2x ETH value (3.2 K)
The ETH value of 1 WBTC (50K) minus 20% hair cut (40K)
The ETH value of 1.5 YFI (50K) minus 30% hair cut (35K)
which would equal approximately 78K or about 48 ETH at the current price level! Yet in the current scenario the wallet holder cannot sell just 10 ETH equivalent covered calls.
— End of example —
Creating a whole decentralised options trading platform might be an overkill, especially given that BlockZero aims to have the project done and dusted in 3 months. But creating a dynamic tokenised representation of the wallet that can act as collateral for margin would be an excellent start and can be used by many options trading projects even including the centralised ones for margining purposes.
If the value of the wallet decreases below the required level the positions would get liquidated and the “spend approval” required for the creation of the collateral would be activated and the assets recovered (to the extent required for the settlement) from the wallet, sold and the trade settled.
This would continue to work even if the wallet holder buys an option to protect is sell (short) position as the value of the bought options can be calculated and added to the value of the collateral, of course as long as the bought option is in the same wallet.
5) What problem is your token aiming to solve? How will this positively impact the crypto industry?
Inability to get the required margin collateral for options writers, be it DEXes or CEXes, in spite of significant high-quality assets in the wallet.
6) What was the inspiration of this token? How did you think of it?
Frustrated that in spite of significant wallet holdings not able to take advantage of them for margin collateral purposes to trade options in a decentralised or even in centralised manner. Frustrated with the consequent stunted DEX options market leading to a over reliance on Deribit. Even at Deribit the collateral has to be the exact same asset as the underlying against which a trader wants to write/sell options.
7) Are there any projects out there doing something similar?
Not that I am aware of. I wish one existed!
8) What phase is the token in? Explore vs. Build vs. Launch vs. Scale. (If there has been no coding yet, your token is in the explore phase)
9) Will this token be inflationary, deflationary, fixed, or dynamic token supply?
Dynamic as the derivatives market is huge (multi-trillion dollar) and a utility token should be accessible. $WALLIE will be needed to mint the NFT-like unique tokens that represent the wallet collateralisation.
10) How long do you think it would take to build a minimal viable token?
Sticking to the core idea described here, it should be well within the BlockZero standards of 3 months.
11) What skills do you have that would help bring this token to reality? (ex: Marketing, Development, Branding, etc)
I am an investor and part-time options trader, amongst many others. Often I use options as an investment tool (LEAPs) and/or to reduce the cost of holdings. I understand complex options positions and the requirements for margins, collateralisation issues, etc.
12) Are there any inherent weaknesses or obstacles to building this token? Any items you still need to figure out?
Yes. The price of the assets need to be tracked (from Uniswap or an Oracle) and the holdings of the wallet need to be continuously monitored/tracked so that any under collateralisation (deliberate or inadvertent) can be avoided and the “spend” approval can be put to effect immediately and/or the positions liquidated to avoid losses for the counterparty. However, this should be possible and straightforward as the wallet information is on-chain (can be monitored like ETHExplorer does) and is available continuously. It should be designed that the option writer/seller does not bypass the “spend approval” and siphon out the assets before the dAPP can recover the collateral in case of market moves against the writer’s positions.
If you want to share your Twitter/Telegram handle here for people to reach out and discuss this idea with you, post them below.
I prefer people messaging me directly with their contact handle so that we can discuss it further.
This is where you can put anything you want that was not directly asked above! Anything and everything related to your token idea can go here. Any files, links, info, etc
#DEX #Options #Derivatives #NFT #Collateralisation #Margin #OptionWriting #CoveredCall #SecuredPut #Wallet