Options Liquidity Mining

The Basics

Options Liquidity Mining (OLM) enables projects to mint ERC-20 call options (oTokens) as incentives for various use cases. It offers protocols greater control and flexibility when designing their incentivization programs through configurations such as quote asset, payout asset, strike price, epoch length, and eligibility window.

Like bond markets, OLM deployment is fully permissionless. Although we don't support deployment on our dApp, we offer ready-to-use contracts for liquidity mining (auto-create tokens and issue), exercising, reclaiming, minting, and redeeming — making it a seamless process to adopt OLM.

Additionally, our solution breaks free from reliance on oracles, making it accessible to newer protocols that may not meet the requirements (e.g. high trading volume, large and stable liquidity, etc.) for obtaining a reliable oracle.

Inner Workings of OLM

Exercising Options

oTokens can be exercised within the eligible and expiry dates, at a fixed strike price determined at issuance. In this scenario, the issuer recoups the quote asset strike price required for exercise, while the purchaser receives the upside payout (option price-strike price).

Expired or Unexercised Options

In the case of expired or unexercised options, the issuer can reclaim the payout collateral initially provided to mint the oTokens. This means the issuer does not have to pay out liquid incentive tokens. As a result, the upside is shared between the issuer and exercising purchasers, while the downside is not exacerbated by further farm & dump activity.