Opyn is a free-to-use insurance protocol since anyone can use it without passing through some stringent criteria. With this, DeFi investors now have the impetus to step up their game because their monies can now be protected.
As more money goes into DeFi, the need to make sure nothing happens to them increases. The goal of insurance is to make sure no DeFi user is afraid of investing his/her money because of the risks involved. It is a solution to the downsides of investing in popular lending protocols like Coinlist and Curve.
Another reason why people are happy that insurance is coming into DeFi is that it will help the industry to be more popular and grow at a faster rate.
Nowadays, what is obtainable for insuring DeFi users’ funds are not permissionless. Hence, many do not easily register their investments for security against fraud. What DeFi actually needs is a permissionless insurance system so that more money can be supplied to the industry. It is possible for DeFi companies to add some insurance packages to whatever they are offering. Just think of a situation where members on Compound are encouraged to buy some insurance packages in a bid to secure their investments. That would be a welcome idea because it would guarantee the safety of their funds even though they may earn less in the end.
Opyn was first seen online last year in June. What Opyn first hand in mind was to give users a platform where they can freely do margin trading with DAI, Ethereum, Uniswap, and Compound. Opyn wanted users on these platforms to buy and sell their ERC20 tokens without much stress.
But plans changed in February 2020 when Opyn upgraded from its alpha version as it thought there was every need to provide insurance service. It started this service with Convexity Protocol as the two have some kind of relationship in that the person who released the whitepaper, Zubin Koticha, was the same man that established Opyn. It was Zubin’s intention to provide margin trading services without employing custodial services and this led him into creating the Convexity Protocol.
Any firm rendering financial services must have answers concerning how it intends to prevent their clients’ funds from loss. If anything must be done to have a financial system that is capable of meeting the needs of customers, it includes strictly adhering to some ordinances, which is why protocols are set.
If insurance platforms like Opyn exist the more, it will make more people to be attracted into the DeFi space. Opyn is doing even more in this regard by making use of permissionless tokenized options contracts to ensure that DeFi participants invest their money without fears.
Steps to benefit from Opyn
Opyn came forth from the Convexity Protocol. It is completely decentralized and has no custodial services attached to it. It was raised from the Ethereum blockchain so that those using it for DeFi can have a means of raising and giving out put and call options.
Conventionally, people that have the put option can sell a particular stock for a price already fixed, and they can only do this at a date already decided in advance.
DeFi makes use of put options as an insurance to protect DAI from losing its fixed value. If the value of Dai shifts from the normal, users are given the opportunity to buy it at its original price of $1. This makes them insured just in case anything happens to Maker or Compound.
One reason why Convexity Protocol has gained the hearts of many is that it is does not require permission to be used. As a result, Convexity makes it possible for those selling options to make some money with their collaterals if they can deposit Ethereum, create put options, and put them up for sale to get some profits. When the option loses its validity without anyone compromising it, the one that created it gets it back in the form of collateral with the same profit (premium) that would have been made if sold.
If the protocol being insured is hacked and someone already bought the options, the seller would have to forfeit his/her collateral. This is when the option’s seller has to get a premium.
Anyone can get the insurance plans from Opyn by paying some oTokens. This makes Opyn more suited for what the future holds for the DeFi space. Users creating oTokens have the right to put them up for sale through Uniswap. These users can even earn more for making the oTokens more liquid.
At the moment, Opyn covers insurance for users of Compound, USDC, and Dai. As Opyn grows bigger and gets more experience, it will surely embrace more DeFi protocols.
The first thing to do if you would like to benefit from Opyn’s insurance coverage is to go to the website . The whitepaper which describes the plans of the Convexity Protocol will also widen your understanding.
Discord and Twitter are two important places to follow up discussions regarding the platform and also air your own opinions.