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FinNexus Protocol for Options

The FinNexus Protocol for Options (FPO) is the cross-chain, permissionless protocol for options built by FinNexus. FPO launched on Ethereum, Binance Smart Chain and Wanchain, with future plans to expand across a variety of different blockchains.

The first experimental version of FPO v0.1 went live mid-year 2020 on Wanchain and was currently terminated for future upgrades. The official release of FPO v1.0 is scheduled to go live in Nov 2020.

Comparing v0.1 and v1.0

While the two versions may seem somewhat similar at first glance, there are significant differences. The primary difference between the two versions is their different approaches to generating options.

v0.1 Individual Option Issuance

With the v0.1 model, options writers issue each option individually, and make profits or losses according to the market performance of each option they issue. While it is a reliable model, it has several downsides which we hope to address with v1.0.

v1.0 Multi-Asset Single Pool (MASP)

v1.0 introduces the innovative Multi-Asset Single Pool (MASP) model for decentralized options. Under this model, a single monolithic pool of assets is used for the creation of ALL options. It allows for a decrease in risk for options writers and an increase in the variety of options available to options buyers

Differences From Perspective of Users

From the options buyer's perspective, a clear benefit to options buyers in FPO v1.0 is that they can choose the terms of the options at their own discretion; while in v0.1, all options are predetermined by the sellers. As the liquidity of options is shared in the pool, FPO v1.0 will have little price slippage and enjoy much deeper liquidity.

From the option writer's perspective, with the v0.1 model, options writers may specify exactly the individual options they wish to issue. While this does give writers greater control, it also puts them at greater risk. When using the v1.0 model, the options writers simply contribute liquidity to liquidity/collateral pools, and all options are generated from the pooled liquidity. The rewards and risks are shared proportionally amongst all liquidity providers. This gives liquidity providers the opportunity to diversify the concentrated risks faced by a single option writer, while share rewards from the option premiums in the pool.

For a more in depth look into v0.1, v1.0, and for information about options in general, please continue reading the other articles in this section.