A list of frequently asked questions about DeVol Network
What is the DeVol Protocol?
A fully decentralized protocol for cryptocurrency options with Automated Market Making (AMM) and liquidity provision. DeVol stands for Decentralized Volatility.
What is DeVol?
A front-end platform interface that allows traders and liquidity providers to interact with the DeVol Protocol.
How is DeVol different?
DeVol is powered by the DeVol Protocol, which solves the AMM dilemma for options (and more generally non-linear assets), namely the issues of liquidity fragmentation and negative selection. (To learn more, visit our Whitepaper). The DeVol AMM is used for price discovery and to provide maximum liquidity, capital efficiency, low fees, and full collateralization for settlement. Unlike centralized providers which have opaque balance sheets and are subject to counterparty risk, the DeVol Protocol provides on-chain transparency and full collateralization for liquidity pools to cover all potential payoffs.
Which cryptocurrencies are supported as the underlying?
We currently support Bitcoin. More to be announced soon.
Is there physical delivery of the underlying?
No. Option on DeVol are "crypto-settled". This means that there is no delivery of the underlying crypto. When the option expires, buyers and sellers agree to settle the profit & loss of the option based on the observed price of the crypto underlier relative to the base currency, that is the cryptocurrency used for settlement (a stablecoin).
For example, if the underlier is BTC and options are USDC-settled (i.e. the base currency is USDC), buyers and sellers agree to settle the profit & loss of the option based on the observed price of BTC/USDC. There is no obligation to deliver or receive any BTC. Trading pairs (underlier/base currency) could be BTC/USDC, BTC/USDT, ETH/BTC, etc.
Can I deposit fiat currency like USD or EUR?
No. We only support cryptocurrencies and stablecoins.
Are Options European or American style?
Only European Style options are supported.
Do you have a token?
Every deposit of base currency into a Liquidity Pool will generate a pool token/stub token (essentially a deposit certificate) – which has to be returned to get back the deposit adjusted for profit/loss. We are open to other tokens in the DeVol ecosystem, including a utility token that would give users a discount on trading fees, and a governance token, and plan to hear feedback from users and the community during to inform decisions on design and implementation.
How do I sign up to create an account?
Is the platform functional 24/7?
Yes. The trading hours on DeVol are 24/7.
What wallet is supported?
How can I trust that my funds are safe?
DeVol does not take custody of your funds. The DeVol Protocol has access to your wallet funds for trading and collateral purposes via your DeVol Trading Account. To keep your funds safe, transfers can only be made to and from the Wallet Account (i.e. your Phantom wallet) linked to your DeVol Trading Account.
I recently joined, what are the differences between my accounts?
You will need two accounts in order to trade on DeVol:
• Wallet Account
This is the specific wallet account address in a wallet like Phantom. You must link your wallet account to the DeVol Protocol so that you may trade.
• DeVol Trading Account
During the onboarding process, you will create a DeVol Trading Account. This is managed by the DeVol Protocol, and linked to your Wallet Account. The Trading Account is used to trade on DeVol.
For security purposes, funds can only go to and from your Wallet Account linked to this DeVol Trading Account. Deposits and withdrawals to and from this DeVol Trading Account have to be signed by your wallet.
• DeVol Signer Account
During the onboarding process, you may also create a DeVol Signer Account, which is used to pay transaction fees ("gas") directly on the Solana blockchain. This is optional. For users who trade often, the Signer Account avoids the need to sign each trade.
Why do the strike prices not look standard?
Strike prices look a little different on DeVol than on other platforms. This is a feature of the DeVol pricing AMM, which allows for on-chain pricing and capital efficiency.
Can I choose a custom strike price for an option I am buying or selling?
No. You can only buy and sell strikes that are displayed. Currently, we have 95 strikes to choose from.
Why is there no bid/ask spread?
There is no order book and no traditional market makers providing two-way quotes and earning the bid/ask spread. Instead, liquidity is provided by Liquidity Pools earning a share of trading fees for the trades they support.
Does DeVol use an order book?
On DeVol there are no designated market makers, there is no order book, and there is no bid/ask spread for a market maker to earn fees. Instead, we have an AMM liquidity provision structure that democratizes market-making and allows anyone to provide liquidity.
Why am I getting an error message saying “option order is too big”?
The notional value of each trade cannot exceed 0.5% of the size of the Liquidity Pool. Therefore, a given order may be rejected even if you have enough funds in your DeVol Trading Account.
Why is the light at the top right of DeVol sometimes red?
A red light means your DeVol Signer Account and DeVol Trading Account are not connected to the Solana blockchain. They must be reconnected in order to trade. A green light means your DeVol Accounts are connected to the Solana blockchain.
In my Portfolio, what does it mean when "Status" changes from “Trading” to a blinking red “Payoff”?
When you see “Payoff” blinking red it means the option in your portfolio is no longer trading because it is past the expiry date and it has matured. You must manually settle the trade which will free up your options capacity. In order to do this, click the three yellow menu bars to the left of your Trading Pair, and in the dropdown menu, click Payoff.
What does Options Capacity mean?
Options Capacity is the maximum number of unique expiration dates and trading pairs you can have in your portfolio. For example, with a capacity of 4, a trader can have a maximum of 4 separate expiration dates, and each expiration date can only have one trading pair. Within each expiration date and trading pair, the trader may trade an unlimited number of option contracts. You can increase your Options Capacity by paying SOL from your DeVol Signer Account to the Solana Blockchain.
Where does the liquidity come from on DeVol?
Liquidity on DeVol is provided by Liquidity Pools set up for a specific underlier and expiration date. The pools are designed to contain sufficient collateral for a given option (a specific underlying crypto and expiration date), across all strikes, so as to cover all possible outcomes across the distribution of the final price of the underlier at expiration, excluding extreme tails.
What is a Liquidity Pool?
Liquidity Pools are crowdsourced pools of cryptocurrencies or tokens that are locked in a smart contract to facilitate trades. A Liquidity Pool on the DeVol Protocol supports trading by taking the opposite exposure for both option buyers and option sellers, i.e. taking the corresponding short volatility exposure and providing collateral for options bought by traders, and taking the corresponding long volatility exposure for options sold by traders.
What is a Liquidity Provider?
A Liquidity Provider is someone who contributes base currency (cryptocurrencies or tokens) to a Liquidity Pool that supports a specific crypto underlier and option expiration. Anyone can be a Liquidity Provider and deposit to or withdraw from a pool at any time.
Liquidity Providers are compensated for providing liquidity to DeVol by earning a share of trading fees generated from the trades that they support.
Are Liquidity Providers subject to impermanent loss?
No, Liquidity Providers are not subject to impermanent loss. Pool performance has two components:
- 1.The return associated with the pool overall exposure as a result of buying or selling options as needed to meet traders’ needs, taking the opposite side of traders’ orders with respect to all strikes during the active trading period. The actual yield that the pool will earn is a function of the pool’s aggregate volatility exposure (itself dependent on trading activity), the difference between realized and implied volatility and the performance of the underlier.
- 2.Additionally, Liquidity Providers are rewarded for providing liquidity to support trades on DeVol via their share of trading fees. Trading fees earned by Liquidity Providers depend on overall trading levels on the exchange.
Note that implied volatility tends to be higher than realized volatility for the same underlying asset. This creates, over time, a profit opportunity for Liquidity Providers if there are more traders buying options than selling options. If the Liquidity Pool has an aggregate short volatility exposure, it would tend to harvest the “volatility risk premium”, that is the difference between implied and realized volatility. However, that there is no way to predict the aggregate volatility exposure of a given Liquidity Pool, which ultimately will depend on what exposure is needed to accommodate traders.
What are the trading fees on DeVol?
DeVol charges a flat transaction fee of 5-10 basis points (0.05%-0.10%) on the notional value of each trade, regardless of the number of legs in a trade.
Can I use margin for options on DeVol?
No. Options on DeVol are fully collateralized. This means that if you sell individual options, the DeVol Protocol will calculate and block in your Trading Account the maximum amount of funds you could lose. This blocked amount will show up as collateral in the Order Manager and Portfolio Windows.
What if I want to sell options, but I don’t have enough funds to post the required collateral?
If you don’t have enough collateral, you can lower the number of options you want to sell until your collateral is sufficient.
What kind of trading fees can I make as a Liquidity Provider?
Liquidity Providers are compensated by earning fees when they deposit tokens into a liquidity pool. These fees are normally 50% of the trading fees. This means that for every dollar generated in trading fees on DeVol, normally $0.50 will go to the platform, and $0.50 will go to Liquidity Providers. However, the share of Liquidity Provider they may go as high as 100% of trading fees during promotional periods.
As a Liquidity Provider, can I withdraw my funds from a Liquidity Pool?
Yes, you can add and withdraw funds from a Liquidity Pool at any time. Note, however, that withdrawals during option trading are subject to an early withdrawal penalty. Further, withdrawals that would result in the pool balance being insufficient to cover its maximum potential obligation are de facto disallowed.
Where can developers access API information?
API information coming soon.