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Siren Flow Architecture
Siren Flow is fundamentally a two-sided marketplace, consisting of a capital-efficient system for pooling liquidity that generates yield for Liquidity Providers (LPs) by facilitating trading; and a protocol that automates the entire lifecycle of options trading and settlement, creating competitively-priced markets across a wide range of available assets.
Let's dive into all the components that comprise Siren Flow and how they interact in order to deliver a simple yield-generating unified pool experience for LPs and a seamless, fairly-priced trading system! Siren Flow aims to provide a trading experience that is comparable to what traders expect from a centralized exchange (CEX), while still taking advantage of the self-custody benefits of DeFi.
The protocol consists of the following major components:
- Quote Providers. Off-chain services that respond to requests-for-quote (“RFQs”) from traders and generate cryptographically-signed orders that are executed in the Hedged Liquidity Pool. A single order can contain one or more options trades that are executed together.
- Hedged Unified Liquidity Pool. An on-chain smart contract responsible for pooling the unified collateral (USDC) deposited by liquidity providers and market-making options across many available assets. The pool accepts signed orders from Quote Providers and executes them on-chain. Delta exposure in the pools is managed via Hedgers — specialized integrations with perpetual and DEX protocols.
- Hedgers. On-chain smart contracts that integrate with perpetual and DEX protocols to delta-hedge pool exposure. Hedgers receive instruction from the Hedge Keeper, an off-chain service responsible for triggering hedge updates.
- Hedge Keeper. An off-chain service responsible for proactively delta-hedging pool exposure.
- Margin Manager. A set of on-chain smart contracts responsible for managing options margin. The margin manager allows for a portfolio of multiple call/put options for a single underlying asset and evaluates margin requirements holistically, taking into account contracts that offset each other. The manager also settles options post-expiry.
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.