Polynomial

Derivatives

Polynomial is a decentralized options protocol that automates options strategies fully on-chain.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Polynomial automates DeFi option vaults by executing all transaction on-chain and selling options directly to an AMM.
What we like less
No info from the team if access controls are still privileged or have moved to a multisig setup.
What it means for you
Polynomial is building a one-stop DeFi options protocol so you can earn passive yield on idle crypto assets or hedge against impermanent loss using various options strategies.
Information
Exploit/Hacks
None
Info
Key Metrics
  • TVL: $226.6K (Rank #212)
  • TVL Ranking by Derivatives: #0
  • Blockchain: Optimism
  • Chain TVL
    • Optimism: $226.57K
Risk Assessment
Watch Out
Protocol Code Quality
  • Code reviewed by at least one experienced auditor; PeckShield audited in July 2022
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2022; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Bottom 80% by total value locked increases risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • No governance token and/or contracts are fully immutable
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • This protocol is susceptible to risks related to decentralized options, such as loss of principal if they were to expire in-the-money (ITM)
Things to know about Polynomial

How Polynomial works

Polynomial automates decentralized options strategies to create products that deliver passive yield on various crypto assets. The protocol currently has a call selling and a put selling vault. The strategy automates weekly options selling and generates a return on its deposits. To compound returns over time, the vault also reinvests the earned yield back into the strategy. For call selling vaults, there are two variations: asset collateralized and sUSD collateralized. Asset collateralized vaults use the respective asset itself as collateral for option selling. The premium is thus collected in that same asset and is auto-compounded. For example, in the sETH call selling vault, the asset used as collateral is sETH. This vault is typically for users who want to stack more of a particular asset. The sUSD collateralized vault uses sUSD as the underlying collateral for option selling. The premium here is collected in sUSD and then auto-compounded. This vault is generally for users who seek pure profit and don't want the volatility associated with the respective asset. Polynomial vaults sell the newly minted options to Lyra's AMM in batches to collect yield. The vaults use synthetic assets created on Synthetix.

How Polynomial makes money

Polynomial vaults charge a 10% performance fee and a withdrawal fee (only if the vault has an active position). If the vault strategy is profitable and the options expire worthless, a weekly performance fee is collected on the premium earned. If the strategy is unprofitable, then no fees are charged. At the end of each weekly epoch, the option selling vaults have a 2-hour gap before selling resumes in which no withdrawal fees will be applied.

How you make money on Polynomial

You can generate yield by depositing crypto assets into Polynomial's vaults to collect option premiums.