Solana Options Protocol Cega Comes to Ethereum

Cega’s leveraged options vault strategy is expected to launch in the next quarter

article-image

Source: Shutterstock / Satheesh Sankaran, modified by Blockworks

share

Exotic derivatives protocol Cega Finance will be launching on Ethereum mainnet, branching out from its native Solana.

In traditional finance, exotic options fill the same role, more or less, as regular options — enabling leveraged longs and shorts on an underlying asset, but they can be used to achieve specific investment goals that cannot be accomplished with American or European options.

For example, Barrier options have a payoff that depends on whether the underlying asset price reaches a certain barrier level during the life of the option, while Asian options’ payoff depends on the average price of the asset over a period of time.

“Exotic options are a natural evolution in an economic market,” Arisa Toyosaki, Cega Finance co-founder, told Blockworks. “They are a conditional option on top of a vanilla option.”

Seasoned investors can use exotic options to dial in risk preferences while trading a wider range of investment products.

Leveraged options vaults 

Cega also supports structured vault products pitched to enable yields during volatile market environments.

The protocol will be offering a leveraged options vault (LOV) strategy, expected to launch within the second quarter. This option will be offered on top of the products which are already available to those on the Solana blockchain. 

LOV is an options structured product that Toyosaki believes will resolve capital inefficiency in DeFi as it “does not require additional liquidity accessed through redemptions of user-funded margins or overcollateralization.”

LOV’s Gotta Go Fast offering, for example, offers a 21%  to 30% APY. The underlying assets will be BTC, ETH and SOL, and Cega says it will offer a 50% principal protection barrier.

Toyosaki notes that in order to take a leverage position in the existing market, the amount of capital that must be staked — but never put to work — is significant.

“We created a method for our leverage options vaults that is extremely capital efficient and allows you to get a leveraged return by having a combination of options which can maximize your appetite for the market,” she said.

LOV liquidations work like this, Blockworks Research analyst Ren Yu Kong explains: 

  • A user deposits crypto into a vault for a set time period of time — for example, 30 days; and 
  • if BTC, ETH, or SOL drop by over 50% across that period, then; 
  • the 50% principal protection barrier has expired, requiring collateral to be taken.

“From there, the vault takes the worst-performing asset. Say BTC decreased by 30%, ETH decreased by 45%, SOL decreased by 60%. Then the vault will return 40% (100-60) of your initial deposit,” Kong said.

On top of LOV, Cega is also launching a trading firm, Tras Mobian. The entity is designed to resolve one-sided demand issues in decentralized financial markets.

“If you look at every DeFi option vault in the market, everyone is focused on selling options. There hasn’t been a lot of demand for users buying options,” Toyosaki said.

This is where Tras Mobian comes in. It will be focused on research and development in the space, according to Toyosaki, with the hopes of creating more demand for both sides of the market.

Tas Mobian will run independently of Cega, the company notes. A third-party custodian will manage its multisig and oversee its balance sheets and audits.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

Launching cryptocurrencies the old fashioned way may soon make a return

article-image

Kraken and CertiK brought their beef to social media after Kraken said researchers exploited $3 million through a bug

article-image

NVIDIA’s historic run is only deepening the divide between mega-cap tech stocks and the rest of the market.

article-image

EIP-7702 was quickly adopted for the next Ethereum upgrade, but developers haven’t quite locked it down