Introducing Buffer DDOV

Introducing Dynamic Decentralised Options Vaults

Buffer DDOV; Crypto structured products

The buffer team is excited to introduce the first version of a DDOV (Dynamic Decentralised Option Vault). Before we get into the details of a DDOV and how it differs from a conventional DOV, it’s better to know what a DOV is and why we are building one.

What are DOVs?

Decentralized option vaults are on-chain structured products that generate organic yield through option strategies that typically involve covered call selling and cash-secured put selling. DOV, a term coined by QCP capital, has been the fastest-growing organic yield generation product in Defi since Q4 of 2021; more about them here.

The current state of DOVs

Currently, most DOVs, if not all, provide two strategies, namely covered call selling and Cash-secured put-selling. Automating both of these strategies involves four steps:

  1. Selecting an expiry date (weekly/bi-weekly) and an out-of-money strike price (delta between 0.1 & 0.15)

This process has been working well to produce sustainable yield so far. But the static nature of the process has resulted in a few unexpected market inefficiencies like IV dampening for short-term options and front running by option sellers because the timing of auctions is known, resulting in lower yields for on-chain option sellers. You can find more details in this article by Zee prime capital here.

What about Buffer DOVs?

With Buffer’s upcoming DDOV, we have tried to solve some of these problems by introducing some dynamic features to the vaults.

  1. Users can deposit collateral anytime, and it will be immediately available for selling options.

These dynamic features add new degrees of freedom for option buyers and sellers, enabling more active participation from both sides.

  1. Option buyers can buy when IVs are low instead of a pre-defined time.

Added to current features, Buffer Finance’s DOVs are highly customizable and can support multiple option pay-offs and settlement, including binary options, barrier options, and other exotic options. The customisability of DDOVs will enable many unprecedented use-cases possible.

For example, any DAO can mint call option NFTs on their tokens and auction them via any NFT marketplace to raise funds without directly selling their tokens

Ongoing Development

  1. In-built staking — Buffer’s DDOVs will be able to offer additional returns by staking deposited collateral into yield earning pools.

Wen Launch?

We will be launching the first covered call DDOV pilot on our native token $iBFR on the BNB chain this week, followed by wNEAR covered call DDOV on the Aurora chain next week. If you want to launch a DDOV for your token, fill out this form.

That’s it, folks! We will be coming up with a more detailed article on the overall mechanics of the DDOVs the day we launch them. Have any questions, feel free to join our Telegram group or Discord server.

About Buffer

Buffer is a multi-asset option trading protocol. It allows anyone to buy options directly against a liquidity pool.

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