Updated Version here:
Authors: Alexander Angel (@alexangelj)
Created: 2020-05-30
An implementation of an ERC-20 extended contract that matches the specification of a physically settled, vanilla option.
This contract suite contains a physically settled option token contract that extends the ERC-20 standard, a periphery contract to simplify user interactions, and a cloning system for extremely gas-efficient, permissionless, deployments of new options.
The option token has no dependency on an oracle because it is physically settled when exercised. This benefit comes at the cost of being capital intensive for option writers, since every option token minted must be 100% backed by underlying tokens.
Crypto options are complex financial instruments that give the holder leverage over underlying tokens for a fixed time period. Since options expire, their cost to own them is less than the notional value of underlying tokens they control.
The motivation behind this first implementation of an option token is to build a derivative with maximized security. Oracles can become systemically unsecure during periods of high volatility, which increases the surface area of attack of the contracts that depend on them. A physically settled option contract does not depend on an oracle since the tokens are locked prior to minting the option tokens.
While capital efficiency is critically important, security is our first priority. This first implementation is a gas efficient option token with a constrained surface area of attack.
The contracts referenced in this document are exposed to the risk of 100% loss of funds. The Primitive team is confident that most risks have been mitigated through testing and peer-review, but there is always the risk of total loss of funds.