Hey guys :) I’m back with another comprehensive Q&A piece, this time for a robust DeFi protocol for creating, settling, and trading any decentralized derivative – Opium Protocol (OPIUM).
Opium Protocol aims to bring the derivatives market (the single largest financial market in the world) to Ethereum DeFi and is solving three problems in the traditional derivatives market: Transparency, Barrier to Entry, and Cost-Efficiency.
Now, before we dive in, the following piece is similar to my latest articles on Mirror Protocol (MIR), Terra (LUNA), and Alpha Finance (ALPHA), so if you haven’t already seen those, be sure to check them out as well.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is Opium Protocol?
- Who and When Created Opium Protocol?
- What is $OPIUM Token Used For?
- How is the Opium Protocol Governed?
- Example Use Cases of Opium Protocol:
- Who are some Notable Opium Investors?
- Where to store $OPIUM?
- Where to buy and sell $OPIUM?
1. What is Opium Protocol?
Opium Protocol website homepage
Opium Protocol, “Opium” for short, is a protocol that allows for the creation, settlement, and trading of decentralized derivatives. Opium is built and running on Ethereum and is, therefore, an open and universal protocol in which anyone can use to build and launch decentralized financial derivative products.
With Opium, virtually any type of financial derivative product or contract can be created and represented via an ERC-721o token, which is a token standard created by the Opium team. The ERC-721o token standard is specifically designed for trading financial instruments and is backward compatible with ERC-721 and can therefore be used in existing ecosystems.
Thus far, decentralized derivative products that have been created via Opium include:
- ETH futures
- Gas options
- Synthetic pre-markets for upcoming DeFi tokens
- Interest rate swaps
- Art derivatives (tokenized fine art)
- + (see more examples in question #5)
The types of derivatives products that can be created and traded on Opium are truly endless. After all, the derivatives market is 10 times larger than the credit market, 20 times larger than the global GDP, and the total market for derivatives is about 100x larger in comparison to the spot market for any particular asset.
That said, Opium aims to bring any and all derivatives products to DeFi by providing a neutral, universal, and high-liquidity base layer for decentralized derivatives. It aims to have many dapps built atop of its protocol by various organizations and will continue to develop and launch products themselves, built on top of Opium Protocol.
2. Who and When Created Opium Protocol?
Opium Founders Andrey Belyakov and Arjan Van Der Koolj
Opium Protocol was founded by its CEO Andrey Belyakov and Arjan Van Der Koolj in October 2017, who gathered a small team of professional traders, mathematicians, consultants, and programmers with extensive experience in their fields to build out the protocol.
Opium was entirely self-funded and began working on decentralized derivatives long before the “Ethereum DeFi” ecosystem came into existence. As such, the Opium team has been focused over the years on attracting market participants from traditional finance to its three products: Opium Exchange, Swap Rate, and The Art Exchange.
Prior to founding Opium, Andrey Belyakov had 10 years of experience as a professional derivatives trader and fund manager with 30 billion EUR assets under management (AUM) portfolios. He was also an early private investor in Ethereum in 2015 and has been active in the crypto space ever since. Currently, Belyakov serves as Opium’s founder and CEO as well as Head of Investment at Triple Duck Capital BV.
Opium’s Co-Founder, Arjan Van Der Koolj is a serial entrepreneur and private investor with 20 years of experience in managing businesses across the world. He currently serves as the CEO of Triple Duck Capital BV, is a member of the Netherlands Business Council UAE, the owner of Orange Motors B.V., the owner of Vemo Lease B.V., Director of P.A. van der Kooij Holding, among other positions and titles.
As for the rest of the Opium core team, it’s made up of 10 talented individuals with extensive experience in their respective fields.
3. What is $OPIUM Token Used For?
$OPIUM token logo
The native cryptocurrency of the Opium Protocol and Network is $OPIUM – an ERC-20 token that serves primarily as a governance token. The $OPIUM token was created for governance purposes to transfer the ownership over Opium protocol to the community.
$OPIUM Token Use Cases:
- Governance - Interacting with the Opium DAO (ie. voting, proposals, etc.)
- Incentivization - $OPIUM rewards and distribution
$OPIUM token holders use their tokens to interact with the Opium DAO. You can stake $OPIUM to propose protocol improvements and changes, and also cast votes on governance proposals and parameters.
One of the first key parameters $OPIUM holders can govern is the allocation of $OPIUM governance tokens to active protocol users who benefit the Opium ecosystem. They can vote on proposals that determine how to distribute tokens, how much to distribute, for how long to distribute, etc.
Additionally, $OPIUM token holders can propose and cast votes on the following things:
- Changing DAO parameters within its permissions
- Execute actions on the DAO’s behalf
- Allocation of the “active users fund”
- Changes to the codebase of Opium Protocol
Moreover, if any new parameters to govern arise, they will be controlled by the Opium DAO as well.
There is a fixed amount of $OPIUM tokens in the “Active-User Ecosystem Fund” that are unlocked every week in order to be distributed across active protocol users and benefit the overall Opium ecosystem.
Below is a list of example behaviors that are reward with $OPIUM tokens:
- Providing order book liquidity for the derivatives market
- Writing up CDS’s and Options
- Increasing the Total Value Locked in Opium Protocol
- Designing relevant (high-demanded) financial derivative products on Opium
- Incentivize liquidity providers to 3rd party pools/projects that are useful for Opium Ecosystem (e.g. Derivatives as collateral, Balancer pools with $OPIUM)
One of the $OPIUM reward mechanisms implemented today is liquidity mining where Opium liquidity mining tokens are allocated to a Vault from which users can always withdraw their earned tokens. But if they withdraw early, they sacrifice part of their potential tokens to everybody who is left providing liquidity.
Therefore, Long-term oriented participants can expect to receive exponentially more tokens as a bonus. This is an innovative liquidity mining method voted in by the Opium DAO.
$OPIUM Token Distribution:
The maximum supply of $OPIUM is 100M tokens and the circulating supply as of Feb 11, 2021, is 4,161,204 $OPIUM, only 4%.
- 60%: Active-User Ecosystem Fund
- 16%: Investors and Advisors
- 14%: Opium Team
- 10%: Governance Reserve Fund
4. How is the Opium Protocol Governed?
Opium Protocol’s number one priority, besides creating a synthetic derivatives protocol, is to be fully decentralized. It intends on achieving this by:
1) Being built on and powered by Ethereum
2) By following a decentralized governance model via the Opium DAO.
The Opium DAO is fully controlled by $OPIUM token holders who interact with the DAO by proposing and casting votes on governance proposals. Anyone with $OPIUM tokens can propose a governance action (ie. executable transactions, new parameters/parameter changes, new code base for the Protocol, etc.).
When a proposal is made, it has 2-days of voting time in which $OPIUM token holders can vote for or against it. For a proposal to be implemented, it needs more than 50% of votes in favor and at least 8 million tokens voted.
This governance model implemented by Opium can be changed or upgraded to more sophisticated DAOs in the future when scalability and other challenges are solved. But for now, Opium’s DAO serves the protocol’s decentralization needs well.
5. Example Use Cases of Opium Protocol:
Coindesk Article Headline (Source)
Opium Protocol allows for the creation of any type of custom and decentralized derivative including Options, Swaps, Pre-Markets, Futures, Advanced Combined Derivatives, and more.
Some examples of derivatives that can theoretically be built using Opium Protocol include:
- Call/put options on Ethereum gas price
- Call/put options on YFI
- Call/put options on BTC price
- Call/put options on TSLA stock price
- Binary options for sports betting
- Interest rate swap on Compound supply interest rate for USDC
- Interest rate swap on AAVE borrowing interest rate for DAI
- Credit default swap for Aave credit delegation lines
- Premarkets for unreleased DeFi governance tokens (eg. Curve, YFI)
- Premarkets for unreleased network tokens (eg. Polkadot, Cosmos, NEAR)
- Futures on ETH
- Futures on GOOGL stock price
- Futures on olive oil commodity price
Advanced Combined Derivatives
- Financial engineering (eg. market-neutral strategy on providing liquidity)
- Structured instruments (eg. reverse convertibles hedged by plain derivatives)
6. Who are some Notable Opium Investors?
Opium is backed by some notable investors and VCs who have a reputation for investing in successful blockchain-based startups and companies.
For instance, in November 2020, Opium secured a $3.25 million funding round involving investors such as QCP Soteria, Kenetic Capital, and FTX’s Sam Bankman-Fried’s Alameda Research.
Opium is also backed by Hashkey Capital, Galaxy Digital, Rockaway Blockchain Fund, CMS Holdings, One Block Capital Advisory, Zee Prime Capital, SevenX Ventures, Digital Strategies, and Kyros Ventures.
To give you an idea of how important these backers are, some of the companies in their portfolios include:
- Balancer Labs
- 1inch Exchange
- Saddle Finance
- + So much more
All in all, Opium Protocol has a big backing by reputable investment firms that have a proven track record of investing in successful projects.
7. Where to store $OPIUM?
MetaMask wallet website homepage
Opium (OPIUM) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store OPIUM in any ERC-20 token supported wallet.
However, the best wallets for storing OPIUM are non-custodial Web3 wallets that provide seamless access to the best DeFi applications, like 1inch Exchange, Harvest Finance, Uniswap, etc.
That said, DeFi wallets are the best for storing OPIUM because the token is widely used and supported in the Ethereum-DeFi ecosystem.
Popular Opium (OPIUM) Wallets:
- Trust Wallet (mobile)
- Argent (mobile)
- Coinbase Wallet (mobile)
- MyEtherWallet (MEW) (web)
- Metamask (web)
In addition to the above-listed wallets, Opium (OPIUM) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.
8. Where to buy and sell $OPIUM?
Opium (OPIUM) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade $OPIUM is through centralized and decentralized cryptocurrency exchanges.
You can buy and sell OPIUM with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy OPIUM with BTC, ETH, or stablecoins.
- Uniswap - WETH
- SushiSwap - WETH
- 1inch Exchange - USDC, USDT, CREAM, 1INCH, DAI
- 0x Protocol - USDC, USDT, WETH
- Gate.io - USDT, ETH
In addition to the exchanges listed above, Opium (OPIUM) is also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.