There are many benefits for Writers who contribute to the OCTION Liquidity Pool.
Brief Introduction of Liquidity Pools
Liquidity pools are pools of cryptocurrencies that many DeFi projects and even exchanges utilize to enhance liquidity for users to create a seamless experience. This allows the market to easily convert an asset into another without drastically affecting the current market traded price.
Pooling of liquidity may come from many different arrays of people. This may include:
- Hodlers, investors that invest long run and typically do not look to sell their tokens;
- Investors that refuse to sell their tokens because of their previously high entry prices; and
- Investors that simply have too many different coins lying around.
Investors can choose from 2 kinds of smart contract mechanisms when providing liquidity, namely:
- Locking in liquidity for a specified period of time (typically higher rewards); and
- Free liquidity where investors can easily withdraw whenever they choose to (typically lower rewards).
By locking the provided tokens in a smart contract, this enables and empowers newer and smaller projects which are in their growth stages and do not have a large community yet to motivate both current and new investors alike to hold their tokens and not dump them. Since this is a non-speculative method of increasing potential liquidity, it inevitably rules out the possibility of volatility ceteris paribus.
How do Liquidity Pools Benefit Users?
For the OCTION Liquidity Pool, investors looking to participate in this pool will be able to invest their stable coins like bUSD and USDT. Thereafter bDAI tokens will be specifically minted and transferred to the BNB-address of the provider. This liquidity pool will form the “house” that takes on all options contracts bought by Holders.
Writers a.k.a. liquidity pool providers (LPP) will begin to receive premiums after contributing to the liquidity pool. If a new writer/LPP joins the liquidity pool, they will only begin earning premiums that are generated through the OCTION platform from the next activated options contract onwards. All profits/premiums or potential losses from writing options contracts on the OCTION platform before the new writer or LPP joined will not be taken into consideration.
Decentralized cutting-edge lending protocols will provide new and potential users with the latest and most efficient UI/UX, which will enable updated real-time returns. OCTION aims to be the FIRST and most seamless options trading platform built on the Binance Smart Chain (BSC).
Another distinguishing feature is the universal accessibility of the OCTION Liquidity Pool. There are no fees, KYC and/or other geographical jurisdictional barriers, which are very common to a centralized exchange and other DeFi platforms, which typically presents a barrier to entry for investors to participate.
Last but not least, by being the first options trading platform built on the BSC, OCTION overcomes the current challenges faced by options trading platforms built on the Ethereum chain. This is because the significantly lower gas fees on BSC compared to those on Ethereum will allow all options traders to purchase options contracts without having to factor in gas fees as a significant part of their cost when looking to take a call or put position in an underlying asset.