What is Opyn Finance?

Opyn is an exchange platform for options contracts in the Defi space. Using the Convexity protocol, this platform allows traders to gain more profit if the price rises and on the other hand, suffer less if the market falls. Of course, this situation is compared to when traders use leverage for trading.

Opyn uses a service called Squeeth to implement this system. Squeeth is a Power Perpetual. In this type of contracts, an asset is considered as the target asset and according to the contract, it is brought to a certain power.

In Squeeth, as the name suggests, the target asset is ETH and the chosen power is 2. This style of contract is due to the use of convexity protocol. On the other hand, due to the common nature of this contract, no expiration date or strike price is determined for them.

How does it works?

Long position in squeeth service:

Users can enter a long position by paying Ether and receiving OSQTH. The Squeth service uses Ether to the power of 2 as the token asset. That is, if ether doubles, the price of our token, which is OSQTH here, will quadruple; But if the price drops by 50%, our token will drop by less than 100%. This is because a long position in the Squeeth service is liquidated only if the Ether price drops to zero.

Short position in squeeth:

In Short Squeeth, unlike the long position, the short position is liquidated; For this reason, users who want to enter this position must make a deposit. Short position holders, in addition to making money from the Ethereum price drop, also benefit from the funding rate that long position holders pay.

A unique feature of the Squeeth short position is that traders no longer need to fully collateralize. Those who want to enter the short position, can pledge partially.

Methodology:

The data provided by Flipside has been used to handle this analysis.

• For TVL determination:

  select * from ethereum.erc20_balances

  WHERE (USER_ADDRESS = LOWER('0x5934807cC0654d46755eBd2848840b616256C6Ef') OR USER_ADDRESS = LOWER('0x64187ae08781B09368e6253F9E94951243A493D5')

• For position analysis:

  first find out the tx_hash from ethereum.core.fact_event_logs

  Then by the use of ethereum.core.ez_token_transfers table, underestimate the application of Opyn positions.

  The Short position contract:

  where contract_address = lower('0xa653e22A963ff0026292Cc8B67941c0ba7863a38')

  The long position contracts:

  contract_address = lower('0xf1B99e3E573A1a9C5E6B2Ce818b617F0E664E86B')

Part 1: TVL analysis

Key findings:

The first part and one of the important part of investigating on each protocol is TVL analysis.

The latest TVL on Opyn is 62.7 million so.

• The weekly TVL analysis of Opyn reveals the decreasing pattern after market crush on ==May 11== so the greatest TVL of Opyn happened between ==April 18 to May 2, 2022.
• The TVL of Opyn by tokens shown in the bar graph and according to this chart, the ==WETH== has been dominated the TVL of Opyn.
• Monthly and cumulative TVL of Opyn by tokens have been displayed the large area related to WETH and WBTC and the breakpoint on Month ==April== in the monthly basis.

Part 2: Short and Long positions on Opyn

Key findings:

Now lets dive into the positions of Opyn finance and find out the application of these positions over time.

• Based on the graphs related to the overall analysis, the ==Long positions== on Opyn has more application than short ones.
• The weekly number of positions on Opyn demonstrated the increasing trend on Long positions and the highest count of Long positions happened on ==August 15, 2022== by ==98 unique users==.
• The Volume of Long and Short positions on Opyn shown in the area graph and according to this graph the maximum ==volume== of Long positions on Opyn occurred on ==June 20, 2022==.
• The cumulative number of positions on Opyn validate the trend of popularity of Long positions over time.

Final words:

There has been no liquidations for Long positions because of the protected downside.

If short Squeeth positions fall below the safe collateralization threshold ==(150%)==, they are at risk of liquidation. A liquidator calls liquidate and provides some oSQTH to the contract. This improves the collateral ratio of the vault by reducing the debt. In exchange the liquidator receives 110% of the value of the provided oSQTH in eth. The contract only allows a liquidator to liquidate 50% of a vault at a time, since vaults will usually be safe after this and there's no sense in liquidating a safe vault.

References and useful links

• Official website
• Docs on positions
• Github on Opyn

Author:

Credited by MZG

Discord handle: m.zamani#0361

Twitter handle: @GargariZamani