Lyra is the first project to be built natively for OΞ, accessing a design space that is unbounded by the constraints of layer one. This allows new approaches to hard problems like options, which have complex pricing and risk mechanics that require OΞ’s scalability. We’re beyond excited to begin the era of OΞ native projects and can’t wait to see what the community builds next.
While we are thrilled to launch the protocol, we are determined to do it in a way that minimizes risk for our community. This philosophy has been with us since the birth of Lyra; one of the fundamental goals of our project is to reduce risk for LPs. We have taken extensive measures to test the protocol to date, running successfully on Optimistic Kovan for almost two months, including a trading competition with over 3500 traders that stress-tested the contracts and mechanism. We’ve also undergone multiple audits and launched a bug bounty with Immunefi.
However, it’s not possible to simulate mainnet conditions, which is why we have opted for a controlled launch, beginning with a single market with liquidity provided by the LyraDAO. As we build confidence in the system over the coming weeks, we will progressively add markets and open up liquidity provision to the public.
LEAP-2 was proposed to the Lyra Launch Council at today’s community call and approved unanimously. As per the LEAP, the ETH market has been launched with two expiries, each with seven options available to trade. Traders will be able to open long and short positions on all ETH options. Please refer to the onboarding guide for more information about how to start trading.
In version 1 of Lyra, liquidity works in “rounds”. Liquidity cannot enter, nor can it be removed, until a round is over. The LyraDAO has seeded the entire liquidity for this initial round, adding 500,000 sUSD. By seeding the first round with DAO funds, we will be able to build confidence in the smart contracts, mechanism, and parameters. While there is currently no interface to provide liquidity to the protocol, the smart contracts are permissionless and can be manually interacted with.
The ETH market will not be delta hedged until Synthetix deploys the shorting mechanism as per SIP-135. This means that returns will be correlated with the returns of ETH. Prospective LPs should take this into account before depositing any funds to the protocol.
We would also like to highlight that, being the first time the protocol is deployed in a live environment, there are a number of other potential risks. There are currently no slippage controls in the dapp or smart contracts, so the execution price could be significantly different to the expected price. In general, the protocol should be considered experimental and we urge traders not to use any funds they cannot afford to lose.
The system has a number of parameters that affect pricing, slippage, and the level of risk that the AMM is willing to take on when trading. The team observed the performance on testnet and performed rigorous simulations to determine the initial configuration. However, simulations rarely map one-to-one with the real environment and it is possible that unaccounted-for issues arise. Please note that initial markets will have high slippage due to low liquidity and sensitive parameters. Slippage controls are actively being developed, however are not currently in production, so users are urged to be extra cautious when executing trades and to control their risk by only trading small amounts.
Optimism is still undergoing active development and there is a high probability of downtime as the network continues to be upgraded over the coming weeks. We are in close contact with the Optimism team and will communicate any planned outages as they are made known to us.
We’re planning to add markets for other assets over the coming weeks, as we build confidence in the system. We will also be adding an interface for providing liquidity to the trading dapp. Today's launch is a special milestone for the project and we would like to thank our community for helping us get here.
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