Opyn-ing up DeFi Options

Options in CeFi are synonymous with Deribit - the leading options exchange accounting for +90% of all notional volumes in BTC and ETH. Options in DeFi are synonymous with, well... nothing at the moment. In fairness, DeFi is a relatively young ecosystem and options are further up the complexity curve than simple spot swaps and yield vaults. However, while DeFi options volumes remain small, there is one options protocol that has seen significant growth over the last 4 months - Opyn.

To start the year, Opyn was doing less than 25% of on-chain options volume compared to Hegic which was the dominant options protocol at the time. Now Opyn accounts for over 94% of a much larger options volume share.

Even relative to the much larger CEX options markets (~38x more volume), Opyn has carved out a meaningful share of volumes, specifically in the ETH markets. It started the year with 0.3% of ETH options volumes and has grown to nearly 7% share (21x). And, if you pull out the dominant Deribit, Opyn has grown to account for over half of all non-Deribit ETH options notional volumes. Note too that this growth came at a period when the overall CEX notional options volumes dropped 74% from May through July.

Where is this growth coming from? What use case has caught on to facilitate the rise of options trading? What’s the protocol’s strategy for continuing growth?

But first let’s understand the core components of the protocol itself.