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.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

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

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Crypto is fast and it’s only getting faster as bitcoin threatens to retest its own highs set more than two years ago

article-image

The settlement ends the legal battle over eth.link, a domain once owned by imprisoned developer Virgil Griffith

article-image

TBC President Lee Bratcher told Blockworks he’s “confident” about the Council’s case against the DOE

article-image

The Monday trading volumes total passes the previous high mark set on the fund’s first day of trading nearly seven weeks ago

article-image

The hearings are expected to last for a couple of days as the court hears arguments for and against the bankruptcy plan proposed by Genesis

article-image

Equities were mixed toward the end of Monday’s session while cryptocurrencies continued their rally