Structured Floor Token (DEXTF + Opyn + UMA)
We’re stoked to announce the launch of a new Structured Floor Token on $ETH developed in partnership with Opyn and UMA Protocol.
The new SFT has a strike price of US$ 2,500 per $ETH expiring on 31 December 2021 built combining Opyn options and UMA’s Zero-Coupon Bond tokens.
Two weeks into our Mainnet launch (in September 2020), we created the first iteration of SFT (learn more here), combining yUSD (for yield) and a call option (Opyn) on ETH
This approach had 2 main issues:
- yUSD returned a floating yield, which leads to a potential floating SFT floor price (also not capital efficient)
- Liquidity was thin as SFTs minted with available assets at the time
After the well-received launch of several batches of SFTs, we took in the community’s advice to generate sufficient liquidity to satisfy the rising demand for these products.
This partnership made it possible to use the capital-efficient UMA Zero-Coupon Bond tokens replacing yUSD.
UMA ZCB tokens are a longer maturity version of UMA’s yield dollar.
ZCB tokens are collateralized debt sold at a discount by borrowers on the market. ZCB buyers are, therefore lenders. This is a superior asset to yUSD because the yield is known and fixed once you purchase it from the market. ZCB token market price corresponds to the present value of the loan at maturity.
The longer the expiration, the cheaper the time value of the structured token, which means that the structured token will have a relatively higher participation rate. So, if the investor was very bullish on the underlying but had no intention of being fully exposed to it, holding on to SFTs turns out to be the most efficient way to invest.
Where to Trade Them
Yesterday, Uniswap has delisted synthetic tokens anticipating US regulatory action on stock-like assets traded on decentralized exchanges. Here is a complete list.
Our new SFTs will trade on DEXTF V1 Marketplace*, our internal DEX based on 0x Protocol.
*SFTs does not require rebalancing. When we will complete the 0x module, we can launch them on DEXTF V2 Marketplace.
Why Structured Products
In a highly levered environment, structured products stand a chance to fill the gap left for traders that want to outsource risk management while still reaping the benefits regardless of market performance.
From today, SFT traders don’t need to sell their holdings into stablecoins anymore, as the floor price, especially with UMA’s Zero-Coupon Bond token, is returned to the trader at expiration should the market underperform relative to the strike price.
Opyn is a product and open protocol on Ethereum that allows users to buy, sell, and create options on any ERC20. DeFi enthusiasts and projects alike rely on Opyn’s smart contracts and interface to hedge against DeFi risks and take positions on different cryptocurrencies.
UMA is a protocol for building synthetic assets, and it is designed to power financial innovations using concepts borrowed from fiat financial derivatives. But unlike traditional derivatives, UMA contracts are secured with economic incentives alone, making them self-enforcing and universally accessible.
DEXTF is a decentralized asset management protocol that allows DeFi users to launch, mint, redeem and trade XTF fund tokens from a growing list of supported ERC20 tokens. XTF fund tokens are ERC20 tokens.