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The Time is Upon Us - The Short Put #6, June 30th

Summary:

• 🎉 Avalon • 📊 Lyra Weekly Stats • 🚀 Lyra Product Updates • 📝 Lyra AMM Performance update • 🏛 Genesis Volatility Lyra Video • 🌉 LEAP-26 – Bridging Tokenomics until xLyra • 🔬 Software Development Kit • 🦀 Ecosystem News • 💡 Optimism Phase 0 Update • 🎯 Grants Council • 📈 LEAP Status Tracker

Avalon:

It’s here! We’re proud to announce the most significant upgrade to Lyra yet, Avalon. If your not excited then watch the video below!

https://twitter.com/lyrafinance/status/1541581372267327488

Now live on Optimistic Ethereum, Lyra Avalon builds off the strong foundation established in V1 (Two-sided options markets, unified liquidity, composable delta hedging) with a suite of new features which will offer the best options trading experience that DeFi has ever seen.

Avalon provides a step change in the options trading experience for DeFi, with a list of innovative features which have been requested and refined by the Lyra community.

With the release of Avalon, Lyra becomes one of the most robust, efficient and accessible options trading experiences across all of decentralized finance. An excellent trading experience combined with predictable, programmable, deep 24/7 options liquidity will lead to more fees for LPs, driving even more AMM liquidity which in turn generates an even better venue for traders.

Checkout the Avalon blog to get a detail summary of all of the new and exciting protocol features, developer tools, redesigned trading interface, security audits and more.

https://blog.lyra.finance/avalon-is-live/

Lyra Weekly Stats:

30d Active Traders: 835→ 1027 +23% from May to June Average Notional Volume by Trader: $37,718 Average Premium by Trader: $1,302

Despite a bear market Monthly Unique Traders is still rising
Despite a bear market Monthly Unique Traders is still rising

Lyra Product Updates:

On June 24th Jake gave us an update on Lyra’s Market Making Vaults

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Access to Lyra’s marketing vaults UI are here.

Contracts have been redeployed post-audit, so traders will lose history for the last week. Make sure you message the team in #support if you believe your positions didn’t settle correctly.

Product updates!

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Avalon docs, Including the Final Audit Reports, are live! Read there here:

https://docs.lyra.finance/overview/audits

A new landing page has been launched! Check it out here:

https://www.lyra.finance/

A new stats page can be found here:

https://stats.lyra.finance/

Make sure you checkout the #trades and #vaults channels as @/Ethboi/ created new bots!

Lyra AMM Performance update:

Now that nearly 9 rounds of trading are in the books, it's time to examine how the Lyra AMM has performed.

The below table shows the round performance of the ETH market pool, each round is typically 3-4 weeks, with Round 1 beginning on November 5th, 2021, and Round 8 ending on May 27th, 2022:

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In the absence of delta hedging, the AMM is almost always long the underlying asset, and this has led to drawbacks in the value of the pool. In round 8 alone, the pool lost $1.58m in value, suffering $1.8m from the declines in the value of its held collateral. With delta hedging switched on, the PNL of the pool would have ranged between +$100,000 (+0.5%) and -$170,000 (-0.82%), depending on the assumed hedging frequency. This is a substantial improvement and a relatively healthy performance for the pool given disadvantageous conditions for the AMM (high volatility of implied volatility).

Delta hedging will be live for all pools during the Avalon release, so we will now fully examine how the ETH pool would have fared if delta hedging was switched on, isolating the options market-making component of the returns.

AMM $ PNL per round with varying hedge frequency
AMM $ PNL per round with varying hedge frequency

One takeaway from this graph is that the AMM has largely been profitable across rounds assuming that its deltas were hedged (!!). Hedging frequency is a balancing act between reducing risk (by hedging often) and minimizing hedging fees paid (by hedging less). Despite this, even during extremely volatile rounds (like round 8) the underlying mechanics of the AMM have yielded a fairly stable return profile assuming hedging occurs between every 3-48 hours. As the AMM is iterated upon with more sophisticated volatility surface modeling and capital efficiency, it’s very possible that these returns could markedly improve. Regardless, this is a strong foundation with which to proceed.

Conclusion

  • The AMM has been live for 8 rounds (~7 months) and has largely suffered from declines in the prices of the underlying assets it’s traded, due to its underlying long delta bias

  • The addition of delta hedging dramatically smooths the returns of the AMM

  • If delta hedging had been live for the first 8 rounds, the AMM would have delivered positive returns for LPs, due to its position as the spread-taker in the market

  • More data and rounds are needed to fully verify these claims, but version 1 of the protocol has yielded a strong start for the AMM

For the Full AMM Performance Update report checkout this Blog:

https://blog.lyra.finance/amm-performance-update/

Genesis Volatility Lyra Video:

With Avalon launching the guys at Genesis Volatility created this amazing video to discuss Lyra and everything you need to know including Avalon!

“…This might be the most sophisticated DEFI Options AMM Yet!…”

Play Video

LEAP-26 - Bridging Tokenomics until xLyra:

Initially, xLYRA was aimed to launch shortly after the Avalon release, however auditing constraints have delayed the xLYRA launch until at least September. The protocol should not wait to implement these important mechanics, and this LEAP maps an implementable suite of changes that will support the protocol in its next phase.

Leap-26 Proposed reward rates:

  • Staking module rewards: 15,000,000 LYRA/year (1.5% of total supply)

  • LP / Trading rewards to be determined by the Council closer to launch date

Make sure you checkout the below on the full details on what passed with LEAP-26:

https://leaps.lyra.finance/leaps/leap-26/

Software Development Kits:

Lyra released two Software Development Kits (SDK) for those looking to get their code on; check them out below!

Here is the Protocol SDK so if you're building a dapp that integrates with LYRA this is the code you would use to do that.

Here is the Javascript SDK so if you want to build ETH transactions for from the web/ui layer instead of at the contract level you would use this.

Ecosystem News:

Polynomial Protocol V2 vaults:

Polynomial will be migrating vaults to Lyra Avalon in this update, along with instant deposits, multiple strikes, and partially collateralized vaults. They are expecting the vault upgrades to occur in 1st or 2nd week of July.

One click option strategies on Lyra for Pro Option Traders. Click below for joining the waitlist!

https://twitter.com/polynomialfi/status/1539519924665995264?s=21&t=x044gXPHFhFgnPLHrpNUZw

Lyra x velodrome:

The deeper the liquidity, the more volume. The more volume, the more fees go to Lyra! 113% APY for LPing on Velodrome.

https://twitter.com/VelodromeFi/status/1539697687829831681?s=20&t=rtnvxT6Frgwa2QCv2WlI8Q

Brahma:

PMUSDC_v2 Main Vault is now live! The current APY is at 13.99%. The vault deploys USDC capital into Curve’s stablecoin pools in order to generate yield. The weekly harvested yields are used to take trades on Lyra and Perp to provide boosted returns.

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Checkout this awesome Twitter thread on the numerous upgrades and past performance:

https://twitter.com/BrahmaFi/status/1539997444846796800

Lyra - OPtimism Phase 0 update:

Voting cycle 1 closed on June 22. This voting cycle included Lyra’s proposal of how to distribute 3,000,000 $OP tokens, and it passed with flying colors!

https://twitter.com/OptimismGov/status/1540049300025114624

If you haven’t yet make sure you delegate your $OP tokens to Mike! You can do that here. Then select:

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Grants Council:

Nominations for the second Grants Committee are now open! You can nominate yourself in the #grants-nominations, with applications closing July 1st.

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The Grants Committee recognizes and rewards contributions from the community, and is a key pillar to the growth of the Lyra Protocol as a composable, permissionless primitive for on-chain options. The outgoing committee has done excellent foundational work and issued many grants (to developers and non-developers) focused on our Avalon release.

The incoming committee will be able to continue this work with an additional 600k $OP funding allocated from Optimism Collective Governance for builders on Lyra.

Wants to learn about the current grants? Checkout their webpage:

https://grants.lyra.finance/

Trader of the Month:

With the current market conditions, it is nice to see who thrives in this PvP environment. Trader: 0x864b81c40d8314d5c4289a14eb92f03b9f43b6bc

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only had 13 trades opened with 6 trades settled, and brought in $182,624!

LEAP Status Tracker