Opium Protocol (OPIUM)

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Basics

  • Founded in: 2017
  • Mainnet release: Opium Exchange went live on 16-5-2020, but is paused as of 7-3-2021.
  • Based in: The Netherlands, Amsterdam is mentioned, but their website says Rotterdam.
  • According to their documents, “the Opium protocol is a universal protocol to create, settle, and trade virtually all derivatives and financial instruments in a professional and trustless way. It allows anyone to build custom exchange-traded products on top of the Ethereum blockchain.”

History

"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."

Token

Launch

  • Went live (27-1-2021).

Token allocation

  • From their blog (22-12-2020):

"60%: Active users

This fund will be used to allocate governance to active users of the protocol to benefit the Opium ecosystem. The definition of active users will be decided regularly by governance. More tokens can be allocated for specific actions such as providing liquidity on a specified instrument or term, building actively-used instruments, or other essential activities. The tokens in this fund will be unlocked gradually and distributed retroactively to active community members, based on the specified criteria of active usage.

16%: Investors and advisors

This fund will be used to compensate early investors and advisors for their contribution to the success of Opium thus far. The tokens are going to be vested continuously for the next two years.

14%: Opium Team

This fund will be used to fund the expenses of the founding team behind the Opium Protocol, and to fund key hires and the future growth of the team. A part of these tokens will be granted to current members of the Opium Team and will be vested continuously for the next four years. Opium Team is a fast-growing distributed community of builders consisting of developers, mathematicians, traders, and consultants who strive to further grow and develop the Opium Ecosystem.

10%: Governance Reserve Fund

This fund will be used for external initiatives and partnerships which will help the Opium ecosystem to further grow and flourish. $OPIUM token holders have full control over the usage of this fund through governance proposals and voting."

Utility

  • From their blog (22-12-2020):

"$OPIUM is a governance token."

  • From their blog (27-1-2021):

"$OPIUM is specifically designed for community governance — It is not be considered an investment opportunity or a tool for fundraising. By owning the token, you also will have voting responsibilities to support the goal of reaching a decentralized community"

Token Details

"All positions on the Opium Network are created in the form of an ERC-721o token, which is a self-proclaimed “Composable Multiclass Fungible Token Standard.” It is a combination of the ERC-20 and ERC-721 token standards with some extra functionalities thrown on top to make the standard especially suitable for trading financial instruments, as opposed to the generic ERC-20 standard."

Fee

  • From their Docs (5-2020):

"Each derivative can charge a % fee from the profit maker (the fee is set by the derivative author and its part of derivative definition, it can also be zero) the protocol takes very small proportion from that fee that is set by the author. This is received by shareholders and supporters of the protocol (people who run automatic search and execution of expired positions, market makers and arbitragers). In reality profit maker commissions can be 0.1-0.2% in order for protocol to be business sustainable."

Stablecoin

Tech

Implementations

How it works

  • From this blog (25-6-2020):

"Opium offers partially collateralized options. Compared with the 100% collateral requirements as margin on the strike assets in Hegic, OPYN, and ACO, Opium currently has only a 33% margin requirement for writers that use DAI.

Opium derivatives are European-style and cash-settled. These characteristics mean that the options can only be exercised at expiration and are not physically delivered. The options writer just pays any net profit due to the options holder at expiration in either stablecoins or any ERC-20 tokens."

  • From this comparison of options protocols (1-12-2020):

"Opium is a decentralized derivative protocol, not just for options. It developed options with various underlying assets as ETH GAS, BAL, BZRX, COMP, NXM, YFI, etc. as well as ZEPO and binary options. It launched the first decentralized CDS and IRS products. Opium derivatives’ liquidity is based on order books."

"Anyone can create financial derivative contracts on Opium Protocol."

"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:

  1. Compose
  2. Decompose
  3. 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."

Staking

Scaling

"For Opium, we are currently using meta transactions for order matching but we are planning to implement more advanced L2 tech later this year. We are currently still researching the state of L2 tech and considering which implementations (eg. zkRollups, zkSync, etc.) best fit our long-term plans for Opium." OVM is also later mentioned.

Interoperability

Other Details

Privacy Method

Compliance

Oracle Method

"Opium [will] plug into UMA's Optimistic Oracle product to provide financial derivatives for hedging risks related to SpaceX flights."

Their Projects

"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."

CDS

  • From this comparison of options protocols (1-12-2020):

"In Aug 2020, Opium launched the First Credit Default Swap (CDS) product in DeFi, in collaboration with Aave."

"Cryptocurrency traders can now protect their tether tokens or bet against the solvency of the stablecoin by leveraging a new crypto derivatives product from the Opium Protocol. Opium founder, Andrey Belyakov, claims the product is the “first CDS (credit default swap) on a centralized stablecoin.”

“[Opium Protocol is] using a decentralized Chainlink price oracle to trigger the derivative logic in the most reliable way,” Belyakov concludes. “At maturity, a USDT-USD price oracle is used to determine whether the market price of USDT is still on a peg or has fallen below $0.95 USD — which would pay out the collateral to the CDS buyer. For example, if USDT is traded at 70 cents per dollar at maturity the CDS holder will receive 30 cents per dollar to compensate for a loss.”"

Opium Insurance

SWAP.RATE

  • From this comparison of options protocols (1-12-2020):

"According to the introduction, SWAP.RATE is a platform where you can hedge against or take advantage of the interest rate fluctuations in DeFi lending and borrowing. For the first time, decentralized Interest rate swap (IRS), one of the most widely used financial derivatives, is introduced in DeFi. An IRS is a contract in which one stream of future interest payments is exchanged for another based on the specified principal amount.

For example, by using an IRS, users can fix your floating rate on the deposit or loan. IRS, like a special insurance contract, will pay out the difference between the promised fixed rate and the realized rate at the time of maturity On SWAP.RATE, you can either choose to pay floating and receive fixed rate, or pay fixed and receive floating rate. As the liquidity gets deeper, Opium Team will introduce a live swap curve."

Governance

Opium DAO

  • From their blog (22-12-2020):

"The governance model for Opium will initially be limited to proposing and casting votes on the following changes and actions:

  1. Changing DAO parameters within its permissions,
  2. Executing actions on its behalf,
  3. Allocating the active users fund, and
  4. Making changes to the Opium Protocol codebase."
  • From its docs (5-3-2021):

"The governance model is based on a decentralised autonomous organisation (Aragon DAO). $OPIUM token holders will interact with the DAO by proposing and casting votes on governance proposals, which will change the codebase and parameters of the Protocol and its stakeholders’ behaviour. One of the critical parameters that $OPIUM token holders will control is allocating $OPIUM governance tokens from the Active-User Ecosystem Fund. An amount of $OPIUM tokens will be unlocked every month to be distributed among active protocol users and benefit the Opium ecosystem over a maximum of 5 years.

Anybody who has $OPIUM tokens can propose a governance action. Proposals can be executable transactions, acts or even a new code base of the Protocol. All proposals will hold two days of voting time during which any address that had a voting power on the proposal’s moment can vote for or against the proposal. The action will be implemented if more than 50% voted in favour and at least 8 million tokens voted.

This governance model itself also can be changed to a new one or even upgraded to the more sophisticated DAOs in the future, when scalability and other challenges are solved. That’s why $OPIUM token designed to be a light ERC20 token representing the right to vote and can be wrapped into the any future DAO connected to the Protocol."

Governance Reserve Fund

  • From their blog (22-12-2020):

"This fund will be used for external initiatives and partnerships which will help the Opium ecosystem to further grow and flourish. $OPIUM token holders have full control over the usage of this fund through governance proposals and voting."

Upgrades

Roadmap

  • Can be found [Insert link here].

Audits

"Opium Governance Token and Aragon Voting Wrapper were audited by MixBytes and report can be found here."

Bugs

Usage

Projects that use or built on it

"So far the Opium team has launched three working products built on Opium Exchange and are assisting four external independent organizations on bringing their derivatives to market using Opium Protocol."

Competition

"Opium Protocol is different from its competitors because by design it does not allow for on-chain tail risk (ie. unlimited losses or returns). Instead, it offers robust and universal financial primitives on-chain, whilst allowing for more advanced features (eg. order books, combined orders, market making strategies) off-chain through metatransactions."

Coin Distribution

Pros and Cons

Pros

  • Opium is known for its variety of option products.

Cons

Team, Funding, Partners

Team

Funding

"Raised nearly $3.25 million in a funding round. The fresh cash injection includes participation from Galaxy Digital, Alameda Research, Hashkey Group and CMS Holdings — to name a few."

  • The website says it is backed also by Kyros Ventures and MetaCartel (7-3-2021).
  • Matter Labs; according to Matter Labs, the founders and leadership of a bunch of DeFi projects, among which this project, joined in on the $50m raise for zkSync (8-11-2021).

Partners 

Aave, Chainlink, Zerion, DeFi Prime, The Graph, Ramp, DeFi Pulse, DeFi Rate, The DApp List, DeBank, SmartDec and Blazar.

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