Dopex is one of the largest options exchanges on Arbitrum. Initially launched on the Ethereum mainnet, the platform has attracted a total value locked (TVL) of $29 million since transitioning to Arbitrum with 105k users.
Dopex is a decentralized options protocol that seeks to enhance liquidity, minimize losses for option writers, and maximize gains for options traders.
As Dopex mentioned in its whitepaper, options are complex financial instruments, and creating efficient options that benefit both purchasers and writers is even more challenging. Its solution to the intricacies of options trading is to offer fair option pricing, maximum liquidity, and capital efficiency for writers. The platform also aims to provide cheaper options for traders, incentives for all protocol participants, rebates for option writers via rDPX, and minimal fees and maximum speed through Arbitrum.
Traditionally, users in centralized finance (CeFi) must choose strike prices and options expirations while scouring order books for profitable opportunities. Dopex, on the other hand, employs option pools that allow anyone to earn passive yields. Pool participants deposit cryptocurrency or quote assets, which are used as liquidity for users seeking to trade options.
Dopex offers European-style options that can only be exercised at expiry. Collateral for options is fully backed by the base asset (presently ETH and BTC) or the quote asset (USDT used for settlement). The options are issued as ERC-20 tokens and can be purchased through the Dopex Options AMM. This enables buyers to exchange them on any other AMM protocols, such as Uniswap or SushiSwap, or potentially trade them over the counter and on centralized exchanges.
Speaking of innovation, the Dopex team has developed the Single Staking Options Vaults (SSOV). This kind of vault works similarly to other vaults in DeFi, the innovative point is that assets deposited into the vaults will be sold as CALL or PUT options at fixed strikes and different expiries. Dopex uses epochs for accounting assets, option flows, and reward/rebate distribution of the DPX token as incentives for liquidity provision to the platform. Options come with either weekly or monthly epochs, and liquidity providers can participate in the options pools without seeking permission. Anyone can become a liquidity provider by adding base or quote assets to the pools. Liquidity providers can withdraw their liquidity at the end of an epoch and stand to earn a passive yield with minimal interaction with the protocol.
Moreover, option writers benefit from liquidity rewards in the bootstrapping phase of the protocol. In contrast to traditional centralized options exchanges, users don’t have to look for liquid markets to provide liquidity manually but can do so in an automated and simplified manner.
Also, buyers can benefit from volume pools by depositing funds before weekly global epochs and swapping their options for a different expiry and/or strike price. They can also use funds from the pool to purchase options from any option pool at a 5% discount, allowing for the creation of sophisticated option hedging strategies. Additionally, SSOV enables users to stake their DPX and rDPX while selling them as call options to buyers, thereby continuing to earn a yield on their tokens and utilize them as productive assets.
Dopex utilizes a dual token model, DPX and rDPX, in conjunction with each other to facilitate the protocol’s operations. DPX is a governance token that enables users to vote on the protocol and app-level proposals. DPX accrues fees and revenue generated from pools, vaults, and wrappers built over the Dopex protocol. Holding DPX allows users to participate in various governance decisions, such as the weight of DPX rewards for each pool, rebate amounts in rDPX for each pool, strike thresholds for option chains in pools, fallback for price multipliers in case of delegate failure, and the removal and slashing of delegates.
Dopex has further enhanced the value of its governance token by implementing a Curve approach, where DPX can be staked as veDPX, utilized as margin collateral for options, and potentially minted as synthetic assets in the future.
On the other hand, rDPX is a token minted and distributed to participants in the event of setbacks. Although rDPX has an infinite supply, its emissions are capped since it is only minted from options writers’ losses and liquidity rewards.
There are various use cases for rDPX, such as being a fee requirement for future app layer additions to Dopex, staking rDPX accrues fees, Dopex supports rDPX as collateral, and minting synthetic assets using rDPX as collateral. To create deflationary pressure on rDPX, burn mechanisms are integrated throughout the protocol. The protocol also manages the collateralization ratio to incentivize the usage of rDPX instead of DPX to mint synthetic assets. Dopex is currently implementing a v2 model to ensure the sustainability of rDPX.
How to Use Dopex?
1. Launch the Bitget Wallet (Previously Bitget Wallet (Previously BitKeep)) wallet and switch to the Arbitrum network. Then, click on [DApp] and search for [Dopex].
2. Review the details of the DApp and click on [Confirm] to enter Dopex.
3. After connecting your Bitget Wallet (Previously Bitget Wallet (Previously BitKeep)) wallet, click [Single Staking Option Vaults] to select the Call/Put options you wish to buy.
4. Click on the right menu bar to explore other functional pages on Dopex. You can stake or lock your DPX to earn extra income.