Lyra Finance is a decentralized crypto options trading protocol, which uses Automated Market Maker (AMM) mechanism as a liquidity pool, allowing users to trade options on cryptocurrencies. Lyra is built on Optimistic Ethereum (a layer-2 on Ethereum) that allows traders to access the crypto market 24/7 with low fees and high transaction speed.
How does it work
Lyra Protocol works by allowing users to create synthetic assets by depositing collateral in the form of LYRA – the native token of the protocol. After users deposit their LYRA tokens as collateral, they can create synthetic assets of equivalent value. Options market making fundamentally comes down to finding a market value for implied volatility, the expected volatility of the asset from now until expiration. When implied volatility is high (low), the cost to buy (sell) an option increases (decreases).
The core mechanism underlying Lyra’s AMM is to increase implied volatility (and thereby increase the cost of options) when demand for options is high and decrease implied volatility when supply is high. That way, the AMM can converge to a market-clearing value for implied volatility for each strike and expiration.
Highlights
Lyra Finance uses several mechanisms to provide products and services related to crypto options on the Ethereum blockchain. Highlights of Lyra Finance:
High transparency: The protocol uses smart contracts and AMM to create options and manage transactions.
AMM (Automated Market Maker): Lyra Finance uses AMM mechanism to provide liquidity for options trades. This helps to ensure the transparency and reliability of transactions as well as minimizes the risk of impermanent loss for liquidity providers by adjusting the price of each option contract in real-time based on market conditions.
Decentralization: Lyra Finance is a decentralized protocol, built on the Ethereum blockchain and uses the DAO mechanism to manage and develop the platform. This helps to build a community full of power and active to manage and develop the platform.
Easy to use: Lyra has a user-friendly and easy-to-use interface that makes it possible for users to make transactions quickly and conveniently.
Effective Risk Management: Lyra has implemented various algorithms and measures to help users manage risk most effectively.
Hedging mechanism: Lyra employs Synthetix to manage delta risks on its LPs. When trades are executed on Lyra, LPs are exposed to the underlying asset. To protect their positions, the protocol automatically enters into long/short parts on the underlying asset through Synthetix.
Tokenomic
LYRA is the native token of Lyra Finance. LYRA can be used to pay fees, provide liquidity, or vote on governance decisions.
- Token name: Lyra Token
- Ticker: LYRA
- Blockchain: Ethereum
- Token Standard: ERC-20
- Contract: 0x01ba67aac7f75f647d94220cc98fb30fcc5105bf
- Token Type: Utility, Governance
- Total Supply: 1,000,000,000 LYRA
- Circulating Supply: 295,849,694 LYRA
Allocation
Investors and partners
Lyra Finance raised a total of $6.3 million through 2 funding rounds from many large investors like Framework Ventures GSR or Parafi Capital. Lyra has 3 prominent partners: GMX, Perpetual Protocol and Synthetix. In addition, Lyra Network recently announced a partnership with Perpy, a decentralized derivatives exchange.