ERGO

OptionPools

OptionPools is a pool-to-peer AMM protocol for decentralized options trading on Ergo, leveraging the eUTXO model for security, efficiency, and on-chain pricing.

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What is OptionPools?

OptionPools is a groundbreaking pool-to-peer Automated Market Maker (AMM) protocol for options trading, built on Ergo. It enables secure, efficient, and capital-efficient options trading directly on Layer 1, using Ergo's unique eUTXO model and on-chain Black-Scholes pricing.

Motivation

Options are a core part of traditional finance, but DeFi options adoption is limited due to high risks, complex contracts, and reliance on oracles. OptionPools addresses these by building on Ergo's secure Layer 1, reducing attack surfaces and enabling on-chain pricing.

  • High risks in existing DeFi options protocols
  • Reliance on third-party oracles and complex smart contracts
  • Low institutional engagement due to security concerns

Layer 1 Security

OptionPools uses Ergo's eUTXO model, with contracts verifying outputs rather than executing complex computations, reducing vulnerabilities.

  • Non-custodial, open-source contracts
  • Transparent protocol logic

On-Chain Pricing

Implements on-chain Black-Scholes options pricing, demonstrated during ErgoHack, for transparent and efficient price discovery.

  • Black-Scholes model on-chain
  • Oracle-free pricing

Capital Efficiency

Integrates with Duckpools for undercollateralized lending, enabling capital-efficient options trading and improved liquidity.

  • Undercollateralized lending integration
  • Flexible liquidity provision

Dual-Asset Pools

Supports dual-asset liquidity provisioning, allowing LPs to earn fees in one or both sides of a pair and adopt varied investment stances.

  • Bullish, neutral, or bearish LP strategies
  • No need to maintain market ratios

Key Components

Smart Contracts

Suite of contracts for AMM, options logic, repayments, and proxy interactions.

View Contracts

Off-Chain Code

Python-based off-chain code handles platform logic and user interactions.

View Code

User Interface

A user-friendly web interface for interacting with OptionPools smart contracts and off-chain code.

Limitations & Future Goals

  • Multiple Strikes

    Current implementation supports only a single strike for calls and puts. Future versions will allow custom strikes dynamically priced by the pool.

  • Delta Neutral Strategy

    Future iterations will aggregate 'd1' values from all options to improve AMM pricing and risk management, enabling delta neutral strategies.

Final Remarks & Achievements

During ErgoHack, OptionPools introduced innovations including on-chain Black-Scholes pricing, dual-asset pools, and a historical volatility oracle. The project demonstrates Ergo's potential for advanced DeFi options and capital-efficient trading.

Key Achievements

  • • On-chain Black-Scholes options pricing
  • • Dual-asset liquidity pools
  • • Options price adjustments based on pool utility
  • • Historical volatility oracle
  • • Complete pool-to-peer options trading platform

OptionPools highlights Ergo's unique DeFi capabilities and the value of bridging Bitcoin and other assets into the ecosystem.