— Synthetix ⚔️ (@synthetix_io) June 30, 2020
Last week, we recapped the latest Synthetix community call in which prominent community members expressed very optimistic opinions about the future of the permissionless synthetic assets platform. Perhaps the most exciting aspect of that call was the introduction of binary options – of the ability to make a Yes or No bet on a specific outcome over a predefined period of time.
“Binary options are a type of options contract that provides a fixed return based on a binary outcome in the future. They payout on a certain date if the price of a chosen asset is above (or below) a level specified at the creation of the option.”
While the possibilities of what type of binary options can be created are limitless, Synethtix has launched this new feature with the ability to purchase options on the price of popular cryptocurrencies, commodities, indices, and equities over various timeframes. Best highlighted by the SNX $2 July 9th option, users can purchase a position to go long or short on the price of SNX on July 9th. If SNX continues to trade above $2 at settlement, those with longs (Yes Votes) will be paid out by those who were holding shorts (No Votes).
Seeing as all of these options are fueled by sUSD, Synthetix has experienced strong growth in the past week as traders rush to lock SNX in order to mint sUSD to participate in the hottest new feature Synthetix has to offer.
What’s to Know
Binary options on Synthetix consist of three phases broken down as follows:
- Bidding – The window to purchase long or short options. These can be sold at any time for a 5% fee.
- Trading – Options become fixed and traders receive ERC20 tokens representing their position.
- Maturity – The 6-month window after the option ends in which holders can exercise them for a payout.
A more detailed breakdown of how this all works can be found here.
What’s neat about this schema is that even during the Trading period, users can leverage DEXs like Uniswap or Balancer to buy or sell tokenized representations of given options. This core aspect of DeFi goes to show why Synthetix’s binary options are so powerful as there’s a wide variety of ways to get involved with a given market at virtually any point in its lifecycle.
Since it’s launch less than 24 hours ago, roughly $250k worth of sUSD has been deployed into the options market, with SNX $5.99 Sep 14th and $2 July 9th options holding the most value at the time of writing.
What’s interesting to note is that the SNX $2 July 9th options are relatively balanced on both sides, with ~60% holding longs and 40% holding shorts, despite the fact that SNX is currently trading at $2.26 at the time of writing. This has led some traders to point out how binary options may have interesting effects on spot prices – especially when it comes to the platform’s native token – SNX.
btw, this will be a good binary option market to observe
the $2.00 $SNX 9 July market
~$56,000 deep and bidding phase ends in ~26 hours
— 찌 G 跻 じ ⚡️ 🔑 (@DegenSpartan) July 1, 2020
Synthetix Road Ahead
With the successful deployment of binary options, Synthetix continues to display why it’s a fan favorite DeFi token boasting one of the strongest communities to date.
Outside of the exchange itself, Synthetix’s numerous LP incentives have solidified the project as a leader of the yield farming movement – best highlighted by their latest SNX/USDC Balancer incentives and their partnership with Ren and Curve for the sBTC Curvepool incentives.
For those who are unaware, those who contribute liquidity to any of the LP opportunities on Mintr stand to earn a portion of weekly SNX inflation. This premise is worth touching on as it rewards those who are actively contributing to the community more so than passive holders.
If one thing is for sure, Synthetix continues to establish it’s dominance in the DeFi derivatives sector. With new projects like UMA and Opyn slowly heating up and legacy competitors like Augur announcing their upgrades, there’s no doubt the derivatives sector is in for a huge year.
Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.