👋 Welcome to the eighth issue of The Syllabus from Invisible College – a weekly newsletter that will help you navigate the complex world of web3. To get this newsletter delivered to your inbox, subscribe here:
Before we begin, a disclaimer – nothing here is financial advice. We’re analyzing projects that we find interesting in the hope that you’ll enjoy learning about them as well.
With that, let’s dive in.
In traditional finance (TradFi), the global derivatives market is approximately 25 times larger than the global equities market. But in decentralized finance (DeFi), that isn’t yet the case. Dopex is working to change that.
Dopex is a Decentralised Options Exchange. In other words, it is a platform that lets people buy options (a type of derivative) that are based on the prices of crypto assets.
What are options?
Options are financial instruments that let you buy or sell an asset at a predetermined price on a future date.
There are two types of options – calls and puts. Call options give you the right to buy an asset in the future, and put options give you the right to sell an asset. If you’re bullish about an asset, you could buy a call option which gives you the right to buy that asset for a price lower than the expected market price in the future. If you’re bearish about an asset, you can do the opposite with a put option.
For example, if the price of ETH is $3,000 today, but you predict that it will rise to $4,000 a month later, you can pay an option premium to buy a call option for 1 ETH at a strike price of $3,200 that expires in a month. For the sake of this example, let’s assume the option premium is $300.
In a month’s time, you’ll be able to buy 1 ETH at $3,200, irrespective of the prevailing market price. If the market price is lower than $3200, you can choose to not exercise the option. In that case, you’ll just lose the option premium of $300. However, if you were right, and the price of ETH rises to $4,000, you can exercise your option and buy 1ETH for $3,200. You can then sell it in the open market for the prevailing market price of $4,000. In this case, you will have made a profit of $500 ($4,000 sell price minus the $3,200 option price minus the $300 option premium).
Buying Options on Dopex
Currently, Dopex offers call and put options across a range of cryptocurrencies, most of which are on the Arbitrum L2 (layer 2) blockchain in the Ethereum ecosystem. The protocol was built on an L2 chain to benefit from increased speeds and lower gas costs compared to the Ethereum L1 chain, while still enjoying the same level of security.
In addition to options on Arbitrum, Dopex also offers some options on the Binance Smart Chain (BSC) and Avalanche (AVAX) – both alternative layer 1 blockchains that have fast transaction times and low gas fees.
Since it’s early days for the crypto options market, Dopex still has some limitations. For one, it only offers options on a few currencies and a limited selection of strike prices for each asset. The options on Dopex are also European-style options, which means that they cannot be executed before their maturity date.
However, judging by the progress that Dopex has made in the past few weeks, it’s not going to be long before they expand their offerings.
Selling options on Dopex
Besides purchasing call or put options, Dopex also lets users sell options. Why would you want to do that? Because it lets you sit on the other side of the trade.
If you believe that asset prices will be relatively stable and that Dopex’s premium calculation algorithms are trustworthy, you could become an option seller. As a reward, you get a share of the option premiums that buyers of call and put options pay.
Tokenomics x 2
Dopex’s tokenomics model is unique because it has two tokens.
The first token is a more straightforward governance token called DPX. It has a fixed supply of 500,000 and you can stake DPX to get a share of fees generated on the platform.
The second token, rDPX, is more novel and strange. The ‘r’ in rDPX stands for rebate. This token is awarded to people who lose money in their options trades, so it’s akin to a consolation prize for playing. It doesn’t have a fixed supply, and its utility is still a little unclear. For now, it helps boost your returns from staking DPX. Dopex claims that it will be useful in other ways in the future. We’ll have to wait and see.
Want to learn more about Dopex?
Head to the Dopex Academy and go through their documentation. They have detailed instructions on how to get involved – whether you’re looking to buy options, write options, or provide liquidity.
Read Nat Eliason’s extensive analysis of Dopex
Other projects we’re exploring
Maiar – A digital wallet with a dead-simple user interface for helping new crypto users transition into the Elrond ecosystem.
Sound – A platform that enables artists to debut new music with NFT collections that incentivize early discovery.
Dialect – A smart messaging app that allows web3 developers to send in-dapp notifications and enables wallet-to-wallet chat.
Invisible College Recommended Reads
On the Nature of Privacy | 7-minute read
A short post that will give you a new perspective on data privacy, and guide you through your first steps in securing your data.
Understanding CBDCs | 12-minute read
A piece by Carolyn Rogers that dives into Central Bank Digital Currency design points, issues, and predictions.
How Brands Should Use NFTs | 8-minute read
Some guidance from the Harvard Business Review for web2 brands that are looking to experiment with NFTs.
Secondary Sales for Decentraliens
The Decentraliens mint is officially closed!
If you weren't able to get one, don't worry. We're currently working to launch secondary trading on Magic Eden.
We will make an announcement, as soon as it's available.
Phase II of Invisible College Begins
With a successful mint behind us, we are progressing into the second phase of Invisible College, where we will turn our attention to:
Creating a world-class member experience
Implementing a growth strategy
Coming up with a revenue model that will enable IC to grow its treasury
Enabling community members to contribute through better operations and governance
Read up about the key objectives, upcoming initiatives, and roadmap of Phase II here.
🧠 Web3 Learning Events
Tokenomics 101 – Mon (3/7) @ 2 pm PT (Discord)
Designing a Crypto Wallet – Tues (3/8) @ 6 pm PT (Twitch)
Enabling Community Participation – Wed (3/9) @ 12 pm PT (Discord)
Diversity & Accessibility in NFTs – Fri (3/11) @ 12 pm PT (Twitter Spaces)
🙌 Community Events
Town Hall – Thurs (3/10) @ 9 am PT (Discord)
Want to get Invisible College events on your Google calendar? Just click this link to subscribe to our events calendar.
Invisible College, is a learning DAO that helps web3-curious builders and creators explore and launch projects. If you’d like to learn more about our community and get smarter about web3, check out our Discord server.