Greythorn Core Research: Real Yield Part 2

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  • 30% of option losses are rebated to the user through $rDPX. $rDPX does maintain some form of utility through its use cases, i.e. trading synthetics of traditional asset classes through Umami Finance.
  • Dopex utilises some of its oracles from Deribit, providing relatively competitive option pricing compared to other decentralised option protocols.
  • A portion of protocol fees, 70%, is paid out to liquidity providers, 15% is paid out to $DPX stakers, and 5% is set aside to burn $rDPX, reducing its supply. These portions can be adjusted through $DPX governance votes.
  • Tokenomics design incentivises protocol improvement over the long-term & minimises significant price impacts from insiders (Founders & Early Investors).
  • Operational Allocation: 17%
  • Farming (Liquidity Mining): 15%
  • Platform Rewards: 30%
  • Founders Allocation: 12%
  • Early Investors & Token Sale: 26%
Figure 2: $DPX Emissions over time, Source: Dopex Documentation
  • Single Staking Option Vaults require the position to be fully backed in collateral of the base asset for calls, and USD stablecoins for puts, meaning that option writers do not have access to standard or portfolio margin.
  • Leading crypto options exchange, Deribit offers slightly more competitive pricing (speed & accuracy) & deeper liquidity.
  • Active users on the protocol are increasing, as expected by the growth of options trading amongst general retail & DeFi users.
  • The market for structured products across DeFi remains even more untapped than standard derivatives. Ribbon Earn will appeal to the retail community due to its principal protection. A base APY of 4% is more competitive than the 3pool on the leading stablecoin dApp, Curve.
  • Smart Money accumulated a significant amount of $RBN during July.
  • The revenue earned across the protocol is decreasing. This is primarily due to the decline in TVL from ~$300m to ~$85m, attributable to the inflexibility of the strategies during market downturns. Covered Calls & Put Selling rely on relatively flat markets to optimise returns.
  • P/E Ratio is relatively high at 213.8x.
  • Other web3 options protocols, such as Dopex, offer attractive features such as 30% rebates on option writers’ losses.
  • Ribbon Earn’s APY is capped at ~16%, meaning that participants will not be able to benefit from weekly moves beyond 8% for ETH.
  • None of the products on Ribbon Finance allow its users to capitalise on significant moves to the upside, which may hinder user satisfaction during bull markets with high momentum.
  • A relatively large amount of tokens are held within the community treasury, which may result in the centralisation of the DAO, coupled with the lack of transparency behind the usage of these tokens.
  • Its protocol revenue over the last 90 days dwarfs that of other DEXs that offer decentralised perpetual futures.
  • Robust mechanism to provide demand for $SNX even though it is inflationary. The collateralisation ratio must remain greater than 400% to receive staking rewards. Rewards must be collected before weekly epochs end; if not, they are placed back into the staking pool, resulting in less supply than they would have been otherwise. The formula for the collateralisation ratio is staked $SNX/your share of the global debt pool. There are two scenarios in which your ratio can decrease, namely; $SNX decreases in value, or the global debt pool decreases, increasing your share of it. To deal with the first, users must purchase more $SNX & stake or redeem $sUSD. To deal with the second, you can reduce your debt by redeeming $sUSD or hedging your position through the platform’s partner, dHedge.
  • Synthetix has a significant partner community that contributes to a portion of its trading volume.
  • Competitive Funding Rates relative to a competitor like gTrade. E.g., The current funding rate for BTC perpetual futures on Kwenta is 5%, as opposed to 19% on gTrade.
  • While the protocol does pay out a portion of the protocol’s revenue to stakers, the majority of $SNX’s staking APY is still from inflation. *A recent proposal has been made by the founder to cap the supply of $SNX.
  • Staking rewards comprise almost 60% of $SNX’s token distribution, with terminal inflation of 2.5% expected to begin in September 2023.
  • Many users stake $SNX & hedge their delta exposure through $SNX perpetual futures offered on exchanges, leaving them to collect staking rewards. The issue with this is that perpetual futures are associated with basis risk & funding rates. The current funding rates to short $SNX perpetual futures across the major exchanges range from 49%-58%, effectively neutralising the staking APY.
  • $SNX staking rewards are escrowed & are only claimable after 12 months. While this could be considered helpful in assisting short-term supply pressure, the illiquidity of rewards is a concern. As illustrated by Fig.13, considerable escrow releases are due during mid-2023.

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