Cryptocurrency has become more attractive as an asset class over time, with firms such as Tesla publicly announcing support for Bitcoin transactions and holding Bitcoin on their balance sheet. As cryptocurrency rises in popularity, people have demonstrated an increased appetite to interact with the DeFi ecosystem in ways that model more traditional centralized finance — trading assets, staking tokens to farm rewards similar to an annuity or bond, and more. However, there has not previously been a high-quality decentralized solution for cryptocurrency options trading that offers the features of a traditional finance platform.
Options are an asset with a large market in traditional finance, with more than $300 trillion of notional volume traded every year. Options play a crucial role in allowing investors to hedge their positions, multiply their holdings via multi-option spreads, and more effectively match a portfolio to a model of potential future market volatility. Sophisticated traders expect to be able to construct complex portfolio positions and to move in and out of the buyer’s and writer’s sides of options with minimal friction. Siren is currently the only DeFi platform that allows for this level of flexibility and composability of assets and their derivatives.
We are a team of experienced developers and executives. Many of us have experience in previously successful cryptocurrency companies, some of which you have almost certainly heard of. We have experience writing software that protects billions of dollars, both off-chain and on-chain.
Siren fills a unique market niche by catering specifically to sophisticated parties interested in holding and actively trading tokenized options contracts. Siren Flow has multiple facets to the product that provide unique advantages:
Siren Flow employs a unique hybrid on-chain/off-chain RFQ (request-for-quote) system to deliver competitive pricing for options trades. This innovation allows Siren Flow to offer pricing comparable to centralized exchange (CEX) derivatives while retaining the benefits of self-custody and decentralized trading. The hybrid pricing model paves the way for more sophisticated protocol features, ensuring traders no longer have to choose between security and competitive pricing.
Siren Flow introduces a new pool structure that aggregates liquidity and uses stable coins as collateral for all options. This innovative model enables traders to purchase options for any asset with a reliable price feed, greatly expanding the range of available options, as well as deepening liquidity for any individual asset. By adopting this model, Siren Flow offers unparalleled flexibility and opportunities for traders in the DeFi options space.
Siren Flow’s vaults integrate an automated hedging system that protects liquidity providers (LPs) from delta exposure by interacting with Arbitrum-based perpetuals protocols. By integrating automatic delta-hedging of pool exposure with perpetual and DEX protocols, Siren Flow provides LPs with yield opportunities uncorrelated with market movements.
Siren Flow introduces a sophisticated margin system, allowing traders to buy partially-collateralized options and execute complex options positions. This system enhances the capital efficiency of the liquidity pools, so more options can be created with less collateral while maintaining a similar level of risk. With the ability to use stablecoins or underlying assets as collateral, traders can engage in more advanced trading strategies, including vertical spreads, butterflies, calendar spreads, and straddles.
NOTE: This is a living document that will continue to be updated as Siren evolves. To contribute, please visit Siren on GitHub. Specific questions may be answered and technical guidance may also be provided from time to time in the Siren Discord to those who are interested in building on top of the protocol.