WTF is PODS FINANCE?
Decentralized options are now an essential feature for smart contracts using Ethereum blockchains. But many are still holding back, trying to test why and how they can be beneficial for users. Pods, however, is not like the other option protocols. This decentralized and non-custodial option allows you to create your own calls and puts and also trade them using its Options AMM. It works on a non-upgradable smart contract system set up on an Ethereum blockchain.
Pods's DeFi options offer three crucial benefits that make it stand out as one of the best decentralized non-custodial protocol.
• First of all, users who have volatile assets as their portfolios and also want to hedge their risks now have a safe home to keep their funds in one place without fearing significant losses.
• Users often complain that both managing and placing options in decentralized order books become costly after some time. Pods aims to reduce that cost, making the entire process economical for everyone.
• Sometimes, liquidity options tokens on Uniswap may result in impermanent loss as the price update depends on the input limits. Pods will provide reasonable market prices for both buying and selling options using Uniswap.
This system allows users to participate as buyers or sellers on calls in Uniswap's options instrument or as Options AMM's liquidity providers.
What is Pods?
Pods is one of the best decentralized non-custodial options protocols that allow traders to create calls and puts using Options AMM. Its options protocol has the ability to mint and unmint, exercise and withdraw its calls and puts. Pods ensures that its token implementation allows delta hedged funds an collateralized liquidity. Another reason why this system is beneficial for users is it offers its options in American or European and doesn't leave liquidation system exposure. This makes Pods the safest platform to invest in, especially if you want to deal with non-upgradable smart contracts.
One of the biggest reasons why investors are now paying more attention to Pods than other decentralized protocols is because of its one-sided Options AMM. Here are a few features that will make you want to invest in this system right away:
• It facilitates bootstrapping. This means your options market will now have an automated market maker approach instead of the standard approach that doesn't always provide the benefits that you deserve.
• This revolutionary protocol comes with price options that uses Black-Scholes algorithm. It also offers an account for real-time changes that provides detailed factors, such as spot price and maturity time.
• It updates its implied volatility using program upgrades.
• It maintains the provider's liquidity that the initial exposure sets up and also distributes its pool's results among participants.
This is one of the rarest protocols that foresees external price oracle before updating its spot price for underlying assets. Additionally, it uses Weighted Average Implied Volatility to anchor its internal oracle.
Why is Pods exciting?
Pods stands out from its competitors because of its option contracts. Its option contractions offer a right to buy, but it's not an obligation. On the other hand, it also provides sellers the option to exercise its selling power whenever it wants to. It isn't like other decentralized contract where the system decides when you can sell.
Options in this system represent an opportunity to the buyer and a commitment of the seller. However, both the opportunity and the commitment depend on the contract and its underlying asset. The seller must issue the contract if its wants to sell. But its contract provides a right to the buyer. However, it's not an obligation. The buyer may assess the conditions and then decide whether it wants to buy or not.
There are two types of options prevalent in Pods: puts and calls.
A put option allows you to sell your underlying asset at its strike price. On the other hand, a call option allows you to buy the underlying asset at the seller's strike price.
The rule to exercise your contract is another crucial area that makes Pods so exciting for investors. It allows both European and American options. In the American option, you have to work with a continuous time instrument as it allows you to exercise your rights anytime before the options' expiry. According to the European option, you need to use a point in time instrument that enables the buyer to exercise his rights after the options' expiry.
You have two ways to exercise your options: physical settlement and by cash. Physical settlement means your margin and collaterals that are held in custody will be exercised. On the other hand, cash settlement means the difference between each counterpart should be offset, meaning the contract's margin would be relatively smaller.
If you are planning to interact with options, you should first choose the type of contract:
• Choose whether you want to implement European or American type of exercising.
• Choose whether you want to earn the right to sell or the right to buy.
• Choose whether you want physical settlement or cash settlement.
Once you finish choosing these options, you need to pay attention to some more details, such as expiration date, strike asset, strike price, underlying asset, and premium. Here's what each of these details signify:
i. Expiration date – It tells you the period of which the contract will remain valid.
ii. Strike asset – Strike asset is the asset that you receive in return for underlying assets once the contract expires.
iii. Strike price – Consider strike price as your trigger price. It informs the buyer and the seller that the condition is apt to exercise the agreement.
iv. Underlying asset – This is the object asset. Those who have underlying assets also have the right to buy or sell in the future.
v. Premium – Every option contract comes with a market price. The premium determines that market price and also provides the reward or income that the option seller may receive if he manages to sell the contract. The option buyer needs to pay the premium upfront to hold the contract until expiry.
Pods token and governance model
Pods's DeFi options have various price models that allow users to pick one according to their affordability. According to experts, Black-Scholes is the most productive model that follows some of the traditional finance rules. This is a mathematical model that provides investors a clear idea of what it assumes and how that assumption leads to the accurate figure of the asset's volatility. However, this model is ideal for European options and only for non-dividend paying assets in the American option.
The American option usually has a binomial and trinomial model that provides an accurate figure of the contract. Every method tries to calculate the approximate contract value so that the seller can decide whether it's profitable to sell the contract or hold for some more time.
Your option instruments will share the same structure, same logic, and also access the same functions. It even creates brand new options using the following information:
• Option token name
• Underlying asset address
• Option token symbol
• American or European exercising type
• Strike asset address enabled for interest-bearing tokens
• Expiration option date available in UNIX timestamp
• Strike price
• Duration of windows in one second
Experts point out that this type of token does not come with any outside requirements to set up new option contracts. In fact, PodOptions imply that the tokens are ERC20 fungible within each option series. Additionally, their burn functions would apply only when they trigger unmint and exercise functions and not otherwise. Lastly, option tokens will have a 1:1 parity with underlying assets. Pods never exercises its options when it is about to get blocked at its contract level. The user will always succeed if the out-of-the-money option buys assets at a relatively higher spot price.
Who is on the team?
Robson Silva Junior and Rafaella Baraldo are the two founders of Pods. Rafaella is also the CEO.
Who has funded Pods?
The duo managed to convince some of the wealthiest investors to invest in its decentralized smart contract plan. Their investments paid off big time. Here are the big names that funded Pods:
• Bitscale Capital as a minatory venture capital investor
• P2P Capital as a minatory venture capital investor
• Framework Ventures as a minatory venture capital investor
• The LAO as a minatory venture capital investor
• Boost VC as a minority accelerator and incubator
How to participate in the network?
There are four ways to participate in this network:
1. As a liquidity provider with incentives from ERC20 tokens that get added to your liquidity pool.
2. As an option seller where you can add, sell, or mint liquidity, unmint, and withdraw your positions of puts and calls.
3. As an option buyer where you can hold, add, and buy tokens and exercise options tokens.
4. As a developer where you can integrate with Pod Smart Contracts directly.
With so many benefits, it's easy to understand why investors are so enthusiastic about participating in a Pods network and make it big in the decentralized smart contract industry.
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