Last Friday, on September 18th 2020, we hosted our very first AMA on the Opium Discord server. Even though we just recently launched our Discord server, some great questions were shared by community members. In this article, we’ve included all questions asked and categorised them for improved readability.
Here’s a quick recap for those who missed it!
Introduction
Deniz (Product & Community Manager) Welcome dear Opium community members! This will be our very first AMA on this platform. Looking forward to try it out with all of you. Our founder Andrey will be joining in a bit. Get your questions ready!
Just some suggestions for questions: Can be about derivatives in DeFi, risks and risk management strategies, the future of DeFi derivatives and exchanges, AMMs vs order book-based systems, Opium Network, roadmap of Opium, etc.
Please don’t ask about token sales or token prices. As most of you know, Opium will have its own governance token $OPIUM but there will be no public sale/ICO. Instead, it can be earned through active participation in Opium Network (as described in the whitepaper).
Go ahead and post your questions now!
AMA: Questions about scalability and gas prices
Q: I have been following the project and I really like the thesis. Long-term very high potential I think, but in the short term the high gas prices make trading derivatives less interesting. What is your view on this and could you share some of your plans for scalability?
Deniz (Product & Community Manager) Fully agree; the gas market has definitely impacted the use of DEXs (both for spot markets and derivatives). What we see now is that smaller trades became economically unviable. What DeFi needs is more and better usage of L2 tech. For Opium, we are currently using meta transactions for order matching but we are planning to implement more advanced L2 tech later this year. We are currently still researching the state of L2 tech and considering which implementations (eg. zkRollups, zkSync, etc.) best fit our long-term plans for Opium.
Q: The latest article on the Opium blog comparing AMM protocols to exchanges with orderbooks mentions that Opium plans to move orderbooks off-chain. Can you share how this will look like from the technical side? And what is the ETA for going live with the first iteration?
Andrey (Founder & CEO) Good news: Opium order books have been implemented off-chain for two years already! Technically we are using metatransactions for our relayer network, where orders are matched and sent to Opium Protocol, where they are validated and settled on-chain. In this way you have the same security as a blockchain and the same speed as traditional order books.
Q: Can Opium do anything about the high gas fees? (eg. Uniswap could implement optimistic rollups and mitigate fees. Can Opium do a similar thing?)
Andrey (Founder & CEO) We are already looking into implementing scalability solutions; it just takes time. In the meantime we are already comfortably using metatransactions for order matching — we just need to settle larger contracts for a while because settlement happens on-chain and is exposed to the high gas prices.
Q: It seems that OVM is the preferred L2 solution for a number of larger DeFi projects. What’s Opium’s view on the L2 landscape? Will everyone end up on OVM to preserve composability?
Ali (CTO) Currently we are evaluating readiness of different L2 solutions such as OVM and zk-rollups for the production. OVM is definitely a good L2 solution and we are already testing our protocol against it. There are many other promising L2 solutions such as zk-rollups, which also have composability. We don’t think everyone will end up at the same L2 solution, but that different L1 and L2 solutions will have its own advantages and use cases.
AMA: Questions about different types of collateral for derivatives
Q: Can you share your thoughts on using (low-liquidity) NFT’s as collateral for Opium to “unlock” their value? Can we already do this right now?
Andrey (Founder & CEO) If the collateral represents any value — no matter the liquidity — it should be usable for derivatives. On Opium, NFTs cannot be used as collateral for smart contracts, but can be used as collateral for more advanced derivatives that are configured on layer-2. This is exactly why the derivatives market is so huge; it allows for additional risk/return on locked funds. Opium is unique because it is composable with both traditional finance and DeFi. The first next step in this composability will be adding support for use of Aave’s aToken as collateral.
Q: Can you share your thoughts on the following scenario: I have a Cryptokitties NFT and I am convinced I can sell it for 10k USD in the future. Right now the market price is about 1k USD. So, it is valued by the market. Can I use this “value” in Opium to unlock liquidity?
Andrey (Founder & CEO) It is a very specific example, not exactly the main use case. But let’s see; in theory you can use it as collateral and create a derivative that covers a 1k$ payout, option, CDS or even perpetual future contract. It is not the best example, because the Cryptokitty may be not the best collateral, but the principle in general is: you can create a synthetic instrument with desired risk-return profile backed by collateral. Keep in mind that the quality of the collateral is crucial. Some low-quality or undercollateralized derivatives create more systemic risks (think of the financial crisis in 2007–2008), but some good-quality/highly collateralized derivatives actually take risk out of the system (example: our CDS for AAVE credit delegation which is fully collateralized by USDC). Derivatives unlock unlimited possibilities to trade all kinds of risk and in many cases make the system more efficient.
A-haa, you just don’t like kitties! I recorded that.
AMA: General questions about Opium
Q: Since Stani Kulechov is now an advisor to Opium, can we expect any additional collaborations between Aave and Opium in addition to the USDT CDS product?
Andrey (Founder & CEO) For sure! Not just because of Stani but because of the whole Aave team and their products — we see a lot of opportunities for collaboration. One example would be the use of aTokens (interest-bearing tokens) as collateral on Opium. There is a lot of value locked in DeFi that’s not being used. Derivatives enables you to put your collateral to work in line with your desired risk/return profile.
Q: Do you guys get a lot of interest from the community of traditional finance people? Are they interested in this solution or not really?
Andrey (Founder & CEO) We have a couple of organisations building on top of Opium Protocol. Not financial organisations per-se, but real businesses that need better and cheaper financial instruments. We like these use-cases a lot and are supporting them.
Deniz (Product & Community Manager) Yes, besides this we are talking to multiple professional traders and market makers from traditional finance that are interested in participating in DeFi markets. For such players we are building a Hummingbot integration, which would allow them to make markets without being exposed to uncapped downsides (which is the case for AMM LPs)
Anastasia (Operations Manager) You can also read more about one of the examples here: https://medium.com/opium-network/a-tale-of-a-startup-testing-their-value-proposition-on-opium-protocol-oliva-futures-cfe10f3b1f5d
Also this one, if you can read in Spanish: https://es.cointelegraph.com/news/a-decentralized-financial-market-for-olive-oil-futures-and-options-is-born-in-spain
Q: What is Opium’s primary target audience? Only finance professionals and fintech developers, or do you see a broader userbase for your products? If so, how will you target them?
Deniz (Product & Community Manager) We actually believe that the gap between DeFi and traditional finance will become smaller over time. Right now, DeFi sometimes feels like a casino and the market will mature once more professional players increase their participation in DeFi. For example, over the past years we’ve seen institutional investors enter DeFi but we believe that they will expand their participation (eg. market making, governance voting). With that in mind, Opium Network is focussed on both today’s DeFi users and more professional players from traditional finance. Opium Protocol is designed to be composable with both traditional finance and DeFi markets. One example of this is that we want to make it relatively easy for professional market makers to provide liquidity to Opium through using Hummingbot.
Q: Andrey, in one of your panel discussions you mentioned that derivatives market is 20 times the size of global economy. Considering this enormous potential, do you think there will be a need for several derivatives protocols? Or can we think of Opium as a protocol which is universal enough and which can be used widely, similar to e.g. tcp/ip, ftp and such?
Andrey (Founder & CEO) What I can tell is that: 1) decentralized derivatives should be composable and have the same conventions as the traditional financial system. That’s the case for Opium Protocol. 2) It can be several protocols of course when we reach mass adoption comparable to professional markets. But all those protocols should speak the same language (that is: the language of traditional financial system — that is the most important “protocol” and all underlying primitives are fine for usage in DeFi)
Q: I know questions about $OPIUM are not wanted as much — but this is a question about future token use: while we can all agree governance tokens are useful, at the end of the day their token utility is based on participation. Will we see recurring cash flows paid out to token holders from platform fees/usage? Or perhaps discounted trading to token holders? What I’m getting at: Are we looking to grow the tokens utility as much as we can when its released & up to that point?
Andrey (Founder & CEO) Everything is possible if governance voters decide so! The system uses a governance token ($OPIUM) and this system cannot be overridden.
Deniz (Product & Community Manager) Exactly. However, in the short-term the governance model will be relatively limited and focussed on allocating $OPIUM tokens from the Active Users fund. This will influence market makers and other participants to act in the best interest of Opium Network (eg. providing liquidity to markets where it’s needed most)
Closing
Deniz (Product & Community Manager) I think we’ll wrap it up for today. Great first-time AMA if you ask me! Thanks everyone for the questions! I will collect everything and publish a recap article on our Medium blog within the next few days. If you have any questions, comments or interesting things to share to the community: Drop it here in Discord! In the meantime we will keep you updated on progress on our side
About Opium
Opium is a universal and robust DeFi protocol that allows for creating, settling, and trading decentralised derivatives. Use our products today to speculate on opportunities inside and outside of DeFi, or hedge yourself against trading risks.
Explore Opium Protocol or try out Opium Exchange.
Stay informed through following us on Twitter, joining our Telegram chat and announcements channel.
