Opyn v2 Gamma Protocol Launches Using Chainlink Oracles to Settle Options
We are excited to announce that the Opyn v2 protocol is now integrated on mainnet with market-leading decentralized oracle network Chainlink to power the Opyn Oracle module. Opyn v2 protocol went live on December 29th, 2020 with a WETH-USDC options market. These options leverage the Chainlink ETH-USDC Price Feed oracle to obtain the current ETH price used during settlement.
Understanding Opyn v2
Opyn is an open, decentralized options platform built on Ethereum that enables users to trade DeFi options. Aiming to be the most capital efficient options protocol in DeFi, in Opyn, traders and investors can interact with the protocol by depositing collateral in a vault to create and sell put and call options (oTokens), earning premiums on those options. Alternatively, users can buy options (oTokens) to hedge against volatility or make trades.
Opyn v1, built on top of Convexity Protocol, laid the foundation for DeFi options as the first live ERC20 options protocol. For the first time, anyone could create, buy, and sell options on any ERC20 token. Since the Opyn v1 release in February 2020, more than 100 options were launched with over $115m in volume traded.
Over this time, we’ve heard helpful feedback from Opyn users and the community, resulting in the development of Opyn v2 (Gamma Protocol), which lays a foundation for a more capital-efficient and highly liquid options protocol.
Opyn v2 Leveraging Chainlink for higher security and a better UX
Opyn v2 introduces European cash-settled options, which require an oracle to determine the correct payout at expiry. We initially launched WETH-USDC options.
Unlike many DeFi protocols, Opyn v2 does not need an “always up-to-date” price from the oracle since there is no liquidation system and the protocol can’t go bankrupt. However, Opyn v2 requires an oracle to provide the most accurate market prices possible at the time of expiry (usually every Friday 08:00 AM UTC).
It’s critical to ensure that the price delivered by the oracle is reflective of the current market conditions at the exact time of expiry. This requires a trusted oracle framework, which is not only accurate, but also inherently resistant to data manipulation attacks such those induced by flash loans. It is for this reason Opyn selected Chainlink as our go-to oracle solution. Chainlink uses a decentralized network of independent oracle node operators who pull prices from multiple off-chain data aggregators, which each track prices across hundreds of exchanges while taking into account volume, liquidity and other important metrics.. Thus, manipulation of a single exchange or even small group of exchanges has minimal to no effect on the underlying price consumed by Opyn v2.
On top of providing high quality data reflective of marketwide price discovery, Chainlink was the right solution for Opyn because:
- Chainlink uses a decentralized network of independent oracle nodes and data providers to obtain accurate prices, ensuring no single point of failure in the sourcing and delivery of data.
- Chainlink has easy and flexible infrastructure that can be implemented by developers with minimum effort thanks to clear and well-maintained documentation and resources.
- Chainlink is a proven, time-tested oracle solution that already secures billions of dollars in value on mainnet for many leading DeFi projects.
In addition to a secure and reliable Chainlink-powered decentralized oracle, Open v2 also has a disputer mechanism in our contract, which has the ability to overwrite an oracle price if any unexpected situation were to arise. This disputer role is handled via a multisig made up of key stakeholders, however, we do not expect to deploy given the time-tested reliability of Chainlink price data. It’s merely meant as additional protection to mitigate against a potential black swan event.
The Opyn team’s main goal is to develop the most capital efficient decentralized options protocol by focusing on security and user experience. Choosing Chainlink enabled the team to focus on the core smart contracts and user experience instead of building and maintaining our own secure oracle solution. We let Chainlink do the heavy lifting on the oracle, deferring to its robust and time-tested protocol that has a laser-focus on delivering reliable oracle data. We look forward to continued integration between Chainlink and Opyn v2 as additional options markets arise.
“We’re so excited that opyn v2 is now live! Our goal with v2 has been to build the most capital efficient options protocol in all of DeFi, and I’m so proud of the team and the community for what we’ve accomplished. One of the best improvements in v2 is that our options automatically are exercised at expiry, so users can buy them and fuggedaboudit! After considering many options, we used Chainlink for cash settlement at expiry because of how simple it was to integrate with, how responsive and helpful the team was, and because it works great for our use case of getting a final price of options for cash settlement. With accurate and secure prices from Chainlink, Opyn on a path to creating a more inclusive, fair, and open financial options market. Options are a ridiculously large market in traditional finance, with more than $300 trillion trading each year, and it’s been so cool to reenvision these intruments for the benefit of the DeFi movement!” — Zubin Koticha, co-founder of Opyn
“We are happy to see Opyn v2 launch with hyper-reliable and secure Chainlink price oracles. The Chainlink-powered ETH-USDC decentralized price oracle will ensure that Opyn users are able to create, sell, and execute automated option contracts based data that reflects a volume-adjusted marketwide price, in a manner inherently resistant to data manipulation attacks.” — Daniel Kochis, Head of Chainlink Business Development
Chainlink is the most widely used and secure way to power universal smart contracts. With Chainlink, developers can connect any blockchain with high-quality data sources from other blockchains as well as real-world data. Managed by a global, decentralized community of hundreds of thousands of people, Chainlink is introducing a fairer model for contracts. Its network currently secures billions of dollars in value for smart contracts across the decentralized finance (DeFi), insurance and gaming ecosystems, among others.
Chainlink is trusted by hundreds of organizations to deliver definitive truth via secure, reliable data feeds. To learn more, visit chain.link, subscribe to the Chainlink newsletter, and follow @chainlink on Twitter.