ACO Black-Scholes — A Pooled Liquidity Model for Options Powered by Chainlink is Now Live!
We are excited to announce that Auctus has successfully integrated Chainlink’s ETH/USD Price Reference Data live on mainnet to power ACO’s first pooled liquidity model for options.
Auctus Crypto Options (ACO) is a decentralized non-custodial options protocol that allows users to trustlessly trade, mint, and exercise call and put options. Our initial launch was facilitated by an orderbook DEX that matched buy and sell orders for options. While we will continue to offer such markets, we are thrilled to expand ACO to now support its first AMM-based DEX for options contracts.
This model will use the most popular options pricing method — the Black Scholes equation, which requires the current price of the underlying asset in order to set the price of an options contract. Acquiring the price of the underlying asset requires an oracle.
After comparing all available solutions, our team concluded that Chainlink’s Price Reference Data was the most secure and reliable price oracle in the market. Chainlink’s price feeds already secure over $3B in USD value for many top DeFi applications and provide a unique set of guarantees that benefit the Auctus platform, including:
- Accurate Prices — Chainlink oracles source prices from a multitude off-chain data aggregators, ensuring our settlement price has strong market coverage across all trading environments
- Decentralized Security — Chainlink provides decentralization at both the data source and delivery level, giving our price feeds high availability and protecting them from various forms of data manipulation
- Transparent processes — All Chainlink price feeds are supported by on-chain visualizations, empowering users to independently verify they are getting a fair market price
<Chainlink ETH/USD Price Feed is secured by 21 nodes and relied on by over 20 projects>
ACO Black-Scholes Pooled Liquidity Model
Option Writers Pools
The system will allow the creation of custom-tailored liquidity pools, meaning option writers can decide which range of strike prices and expiration dates they are willing to mint and sell, as well as decide what is the minimum implied volatility (IV) they are willing to sell. IV is adjusted based on the utilization rate of the pool. This way, each liquidity provider can decide to create a new pool or provide liquidity to pools with different strategies (e.g. selling only out-the-money options, or only short-dated options, etc).
What comes next
AMM Pooled Liquidity
Custom-tailored pools that buy and sell options with mechanisms to limit maximum exposure, enabling them to benefit from the spread, but ensuring that they are not exposed to too much risk.
IV oracles integration
Integrating Implied Volatility oracles to adjust IV automatically according to the rate on centralized exchanges, of which we can use Chainlink to support.
Automated Strategies (Vaults)
Auctus will start developing vaults with automated investment strategies which will create sustainable demand and supply for options.
“Part of building the next generation of options is creating a fully decentralized on-chain trading market with access to on-demand liquidity. Chainlink’s ETH/USD price oracle ensures we can set a fair market price for options contracts while still retaining end-to-end decentralization and transparency, further enhancing our ability to provide trustless guarantees to users.” — Vinicius Melo, Co-Founder of Auctus
If you’re a developer and want to quickly get your application connected to Chainlink Price Reference Data, visit the developer documentation and join the technical discussion in Discord. If you want to schedule a call to discuss the integration more in-depth, reach out here.
Chainlink is a general-purpose framework for building and running decentralized oracle networks that give your smart contract access to secure and reliable data inputs and outputs. Use Chainlink to connect to data providers, web APIs, enterprise systems, cloud providers, IoT devices, payment systems, other blockchains, and much more.