LEAP-22: Launch AAVE Market

Author	KSett
Status	Approved
Created	2022-04-07

Simple Summary

Launch the Lyra AAVE market on the Optimistic Ethereum mainnet, which would be the first ever AAVE options market. This market is to launch once Lyra's Avalon release is in production.

Abstract

This LEAP proposes launching the AAVE market on the Optimistic Ethereum (OΞ) mainnet. A twelve week liquidity round on Avalon will be initiated, seven boards will be created which expire 1, 2, 3, 4, 6, 8 and 12 weeks following launch (all at 8am UTC time). Each board will have seven strikes listed.

Motivation

Lyra's AMM mechanism generalizes to any asset with a liquid spot market. sAAVE is now tradeable on Synthetix's Optimistic Ethereum (OΞ) deployment, and the addition of an AAVE market would increase the range of assets available to traders.

Specification

Overview

The work required to implement v1.2 of the Lyra Protocol will be completed and is viewable here. This section describes the process of deploying the relevant smart contracts, adding liquidity and creating the listings. The process will only differ in that there is currently no liquid AAVE options market in existence, so the initalizations of the board will be determined by the core team, with input from the commmunity.

Rationale

This LEAP proposes launching the AAVE market alongside the ETH, BTC, LINK and SOL markets. The LINK and SOL markets have been live with shorting for over almost a month, and the Lyra mechanism is performing as intended. The AMM was designed to generalize to any ERC-20 assets with a liquid spot market, and AAVE fits these requirements. Moreover, given AAVE's launch on OΞ and their thriving community, it stands to reason that interest and demand for AAVE options will be high. The AAVE market will be launched with delta hedging. The listing of sAAVE spot markets can be tracked here SIP-213.

Technical Specification

1. Liquidity

Liquidity sourcing and possible rewards will be discussed by the Council prior to market launch.

2. Options Quoted

Options will be listed with 7, 14, 21, 28, 42, 56, and 84 days from launch expiries.

Test Cases

Test cases are included with the implementation and are available here

Configurable Values

Configurable values will be determined by the core team, in consultation with the community, prior to market launch.