LEAP-2: Launch ETH Market on Optimistic Ethereum

Author	mjs
Status	Implemented
Created	2021-08-23

Simple Summary

Launch the ETH market on the Optimistic Ethereum mainnet.

Abstract

This LEAP proposes launching the ETH market on the Optimistic Ethereum (OΞ) mainnet. A two week liquidity round will be initiated, with 500k sUSD provided by the LyraDAO. Two boards will be created, expiring on the 1st of September and the 8th of September (both at midnight UTC time). Each board will have seven strikes listed.

Motivation

Lyra has been designed for OΞ. It goes without saying that deploying on OΞ mainnet is an essential step for the project. In order to deploy, projects need to be whitelisted, which requires several milestones being reached:

As a result of this work, the core team has received clearance from Optimism to deploy.

Specification

Overview

The work required to implement v1 of the Lyra Protocol has been completed and is viewable here. This section describes the process of deploying the relevant smart contracts, adding liquidity and creating the listings.

Rationale

This LEAP proposes launching only the ETH market, to allow for close monitoring of the mechanism, contracts and parameters. Adding additional markets will be addressed in separate LEAPs, as confidence is built in the system. Importantly, there will be no delta hedging as Synthetix shorting is not live on OΞ. The progress on shorting can be tracked in SIP-135.

Technical Specification

There are three steps required, deploying the smart contracts, adding liquidity and creating the listings.

1. Deploy Smart Contracts

Deploy the following system wide contracts:

BlackScholes.sol
LyraGlobal.sol

Then deploy the following contracts for the ETH market:

LiquidityPool.sol
LiquidityCertificate.sol
OptionMarket.sol
OptionMarketPricer.sol
OptionGreekCache.sol
OptionToken.sol
ShortCollateral.sol
PoolHedger.sol

Descriptions of these contracts can be found here.

2. Deposit Liquidity

Add 500,000 sUSD to the LiquidityPool from Lyra's L2 DAO wallet.

3. Add Options

Add the following OptionBoard, expiring 14 days from launch:

expiry=1631059200
baseIv=0.92
strikes=[2700,2900,3100,3200,3400,3600,3800]
skews=[1.04,1,1,1,1,1.02,1.02]

This will set OptionMarket.maxExpiryTimestamp == 1631059200 and initiate a two week round in which liquidity cannot enter or exit.

Add the following OptionBoard, expiring 7 days from launch:

expiry=1630454400
baseIv=0.95
strikes=[2800,3000,3100,3200,3300,3400,3600]
skews=[1.04,1,1,1,1,1.02,1.02]

Test Cases

Test cases are included with the implementation and are available here

Configurable Values

The following values are configurable for the ETH market. The core team has chosen the initial configuration.

optionPriceFeeCoefficient = 0.015
spotPriceFeeCoefficient = 0.004
vegaFeeCoefficient = 400
vegaNormFactor = 0.2
standardSize = 0.1
skewAdjustmentFactor = 0.0125
rateAndCarry = 0.09
minDelta = 0.15
volatilityCutoff = 0.55
tradingCutoff = 86400
quoteKey = sUSD
baseKey = sETH