Opium is a universal and robust protocol that allows for creating, settling, and trading decentralized derivatives on Ethereum. Opium allows users to combineany oracle with any financial instrument. Every position is represented by a token that can be traded, sent, or stored in cold wallets. 

Opium Protocol offers robust and universal financial primitives on-chain, whilst allowing for more advanced features (eg. order books, combined orders, market making strategies) to happen off-chain through meta-transactions. 

Opium currently has two products: swap.rate and opium.exchange. At the base level, swap.rate is a platform for creating derivatives while opium.exchange is an open trading platform for decentralized derivatives. 

Background

Opium Protocol was founded by Andrey Belyakov and Arjan Van Der Kooij. Andrey is a professional derivative trader and fund manager with over ten years of experience in the field and is a member of the CFA Institute. Arjan is a serial entrepreneur and private investor with 20 years of experience managing businesses.

The financial derivatives market is the largest in the world but has historically been controlled by large banks and other centralized parties that provide the clearing, settlement, and trading for derivatives. Opium Protocol was founded with the goal of moving these traditional functions to a trustless, distributed, and immutable system in order to lower cost, increase security, and give unbanked people access to the world’s financial system.

Similar to a classical derivatives market, Opium users can be investors, hedgers, speculators, margin traders, or arbitrageurs. However there are also new roles that differ from classical markets in this ecosystem, including relayers, product designers, contract executors, affiliates, and developers.

Features & Products

ERC-721o Token Standard

All positions created with Opium Protocol are represented by ERC-721o tokens that are specifically designed for trading financial instruments. This token standard was created by the Opium team as a combination of the ERC-20 and ERC-721 standards with added functionality. These tokens can be combined into portfolios and are backwards compatible with the ERC-721 token standard, meaning they can be used in existing ecosystems.

The primary portfolio functions for the ERC-721o standard are:

  • Compose
  • Decompose
  • Recompose

When a portfolio is composed, the whole portfolio can be managed or traded as one ERC-721o token, saving gas fees. Upon decomposition, the tokens that were used to compose the portfolio are minted again and stored on the owner’s balance.

Recomposing a portfolio consists of adding or removing tokens to/from an existing portfolio in a gas efficient way, represented by the diagram below:

Opium.Exchange

Opium.Exchange is a non-custodial platform for decentralized derivatives. Users can trade, hedge, or invest without intermediaries and benefit from high-speed orders on meta-transactions with secure settlement on-chain.

Swap.Rate

Swap.Rate is a platform for hedging against or taking advantage of the interest rate fluctuations in the DeFi lending and borrowing space. Contracts are created for interest rate swaps where one stream of future interest payments is exchanged for another based on the specified principal amount. We’ve covered swap.rate here on DeFi Rate when they added support for Aave’s interest rates.

Why Opium Protocol?

Opium Protocol is designed to be composable with both DeFi markets and professional markets. Most derivative protocols in the DeFi space today introduce theoretical risks through the use of on-chain liquidity pools or automated market makers (AMMs). Opium believes in robust and simple on-chain infrastructure that can be further leveraged off chain (layer 2).

This approach to using simple on-chain infrastructure means the more complex features (order books, advanced derivatives, market making strategies, arbitrage, combined orders, etc.) are implemented at the layer 2 level. Users can create decentralized derivatives that benefit from a risk profile more similar to traditional financial products which may appeal to a broader range of users than on-chain derivatives.

Opium Protocol is live on Ethereum mainnet and audited by SmartDec, giving users the peace of mind they need to experiment with DeFi. At the time of writing the team has launched three working products built on Opium Exchange, and are assisting four external independent organizations bringing their derivatives to market using Opium Protocol. 

How to Get involved?

The best way to get involved is by trying out www.opium.exchange. There you can find all derivatives currently listed and view their details. Additionally, stay up to date with all things Opium Protocol via the following social links: