Primitive – a new protocol for tokenized options on Ethereum – has just announced it’s v1 main net launch.

All signs point to early 2021 to be an exciting time for crypto options & derivative protocols with multiple projects launching for the first time and even v2 releases like Opyn‘s Gamma Protocol which we covered here.

The team has warned that the product is still in beta and users should tread carefully. One thing to note is that Primitive currently does not have a native protocol token.

The Primitive team believes that the simplicity of the protocol is one of its strong points, they point to 3 key features that differentiate Primitive from competitors:

  1. Oracle-less & Zero default risk (via physical settlement of underlying tokens)
  2. Single asset liquidity provision
  3. Price & parameters are set by the market, not by complex math

Once an option smart contract is created through Primitive, two tokens which represent ownership: the long and short option tokens. These tokens are created by depositing underlying tokens that must remain in a smart contract until the option has either expired or has been exercised.

Long option tokens give holders the right to purchase the underlying asset at strike price while the short tokens carry the right to claiming the collateral or strike price payment.

Option premiums for Primitive options are calculated from the ratio between short option tokens and underlying tokens, removing any reliance on external oracles. The Primitive team believes that this innovation will enable the creation of a “Implied Volatility” oracle that spits out on-chain data.

Through “flash exercises” the Primitive protocol allows users to take profits from exercising options at no cost, flash loans are also enabled in the protocol so the locked up underlying tokens can be used productively while minimizing default risk for option holders. For audits and official documentation on Primitive, you can view their Notion dashboard here.

While the v1 interface is already live, there is still some work the needs be done for this initial launch to be complete. The team has listed the following as their next action items:

  • Deploying the interface to IPFS.

  • Smart contract audit for the Connector contracts repository.

  • Improving information and analytics on the interface for wallets with many option tokens.

  • Abstracting the use of WETH in the interface so that ETH can be used directly.

 

Keep up with Primitive by following their Twitter.