Lyra

Derivatives

Lyra is a decentralized options exchange built on Optimism.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Lyra offers users a clean and simple user interface for decentralized options trading. Users are able to instantly sell options, as well as undercollateralize their shorts.
What we like less
The available liquidity on the platform is not deep enough for large block trades to occur without significant slippage.
What it means for you
Lyra is an automated market maker (AMM) built on Optimism that allows you to cheapy buy and sell options.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: LYRA
  • Tags: Derivatives
Key Metrics
  • TVL: $1.4M (Rank #190)
  • TVL Ranking by Derivatives: #0
  • Blockchain: Optimism, Ethereum, Arbitrum
  • Chain TVL
    • Optimism: $1.18M
    • Ethereum: $131.87K
    • Arbitrum: $100.81K
Risk Assessment
Average
Protocol Code Quality
  • Code reviewed by several experienced auditors including Halborn and iosiro
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Core protocol launched in 2021; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 20% by total value locked slightly reduces 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
  • Low voting power concentration reduces risk
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 Lyra

How Lyra works

Lyra is an options AMM that allows anyone to buy and sell options against a pool of liquidity. Liquidity providers (LPs) deposit sUSD stablecoin into one of the asset-specific Market Maker Vaults (MMVs). The liquidity is used to create two-sided options markets for the underlying asset (i.e. BTC, ETH). In return for providing liquidity, LPs earn the fees paid by options traders. Traders use the platform to trade options and can either buy or sell options to the MMV. Traders pay fees (in the form a spread) to LPs, as compensation for their liquidity. LPs take on the risk that their capital will appreciate or depreciate depending on the performance of the MMV's options position, which is inverse to that of traders. At its core, options pricing is determined by the current asset price, time to expiry, and implied volatility (IV), which refers to the expected asset volatility from now until expiration. When IV is high/low, the cost to buy/sell an option increases/decreases. The core mechanic underpinning Lyra is to increase IV (and thus the cost of the option) when demand is high, and decrease IV when supply is high. This allows the AMM to converge to a clearing value for IV for each strike and expiry. The MMVs aim to be as close to delta neutral as possible based on the call-to-put ratio. For example. if the ratio is slightly skewed one way, the AMM will purchase sETH to rebalance ETH puts or short sETH on Synthetix to rebalance ETH calls.

How Lyra makes money

The AMM currently does not share any trading fee revenue with LYRA token holders. The token is currently mainly used for incentives as a early bootstrapping mechanism. There are plans in Lyra's roadmap to eventually include a revenue share component with locked LYRA.

How you make money on Lyra

You can deposit sUSD into Lyra to earn a propotional share of trading fees for a specific MMV asset. You can also trade on the platform to place directional bets on the market or hedge your crypto exposure. LYRA stakers and LPs are also eligible to receive protocol incentives.