01 Launching Decentralized Binary Options & Derivatives on Solana

We are excited to officially announce 01, a decentralized derivatives exchange built on Solana.

01 is built to become a fully community owned derivatives exchange empowering the next generation of innovative DeFi trading.

To reach that goal, 01 will first be launching autonomous binary options built on a specialized AMM model providing deep liquidity to traders and attractive yield opportunities for liquidity providers. 01 will also be partnering directly with Saber to provide cross-protocol collateral and liquidity, increasing capital efficiency across DeFi.

Quickly after, 01 will be releasing much anticipated novel derivative classes, alongside instruments that will usher in a new era of DeFi trading (stay tuned for those announcements).

Why Solana?

Solana is by far one of the most powerful, and scalable blockchains, without compromising censorship resistance. Boasting 50,000 transactions per seconds in its current layer 1, sub milli-cent transaction costs, and unrivalled instant transaction speeds, the next generation of DeFi trading innovation will inevitably originate on Solana, and 01 seeks to lead it.

Why Binary Options first?

Prior to the SEC opening binary options to the public in 2007, these instruments were exclusively traded by high net-worth investors over-the-counter. Compared to other trading instruments, binary options offer a low-cost and fixed risk avenue to gain exposure to price fluctuations, volatility, and asymmetric return profiles, all while requiring zero margin maintenance.

These relatively simple trading derivatives can be used as a hedging tool, or for more active traders to trade on price movements, all day and year round.

More importantly, binary options will become crucial building blocks towards 01’s bigger vision in structuring more complex and innovative instruments (more on these soon!).

01’s Specialized AMM & Liquidity Yields

Automated Market Makers have revolutionized peer-to-peer trading by providing constant liquidity to any taker and seller. However, the traditional constant product market maker suffers many economical issues that make them nonviable in DeFi trading — impermanent loss being one of them. So, to retain the benefits of instant liquidity, all while protecting and incentivizing liquidity provisioning, we’ve done a bit of tinkering.

Leveraging the well studied Liquidity-Sensitive Logarithmic Market Scoring Rule (LS-LMSR) Automated Market Maker as our base, we’ve added on top volatility and time adjustment mechanisms, as well as a volume-adapted liquidity engine. These improvements enable 01 to provide instant liquidity and controlled slippage for traders, to mirror real markets effects according to different periods of volatility, and to provide yield for liquidity providers who secure the protocol.

In sum, we’ve designed a market maker that will function in practice like any other AMMs, but with the added benefit of more accurate option pricing, and downside protection + yield opportunity to liquidity providers. To note: despite the improvements, this is still not risk-free.

(More detailed explanations will be included in a separate post.)

Cross-collateral & Partnerships

In our vision to enable capital efficiency across DeFi, we are excited to announce our partnership with Saber — Solana’s leading cross-chain stablecoin exchange.

This partnership will enable Saber liquidity providers to utilize their deposited collateral in Saber stable pools to also secure 01’s liquidity pools (making users’s collateral work seamlessly across both protocols).

As 01 releases more derivatives in the future, traders’ liquidity and assets will automatically be collateralized, enabling traders to take on more positions, and do more with their capital.

The Road Ahead …

As you are reading this article, the protocol team is already hard at work building, and can’t wait to announce what we have in store for the community. Binary options are only the starting blocks on our journey to decentralizing DeFi trading on Solana. And as the protocol matures, governance will continue to be distributed so that the users, and especially early adopters, get to grow alongside the protocol.

Get Involved

Our beta devnet will be released very soon, quickly followed by mainnet. Follow us to get notified!

Site: https://01protocol.com/

Twitter: https://twitter.com/01_protocol

Discord: https://discord.gg/sCeNKSbAV8

Telegram Announcements: https://t.me/onboard01

(Disclaimer: none of this is financial advice)