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What are some advantages that PREMIA V3 offers over other options settlement engines and automated market makers?
PREMIA V3 offers several advantages over other options settlement engines and automated market makers. Firstly, it enables the permissionless creation of option pools which means that anyone can create a pool for any strike (K) or maturity (T). This helps to prevent liquidity fragmentation across too many options. Secondly, PREMIA V3 has an Over-the-Counter quote system built into its base exchange layer which allows vaults and market makers to provide fillable quotes on chain or off chain in order to minimize liquidity fragmentation. Thirdly, vault creators are able to use standard range orders so they can fulfill their strategies automatically onchain with greater capital efficiency than before. Finally, PREMIA V3 supports spot price oracles onchain meaning users will always have access up-to date pricing information when trading options markets through this protocol
In what ways can an LP gain short exposure after full traversal of a range order using PREMIA V3's protocol?
Using PREMIA V3's protocol, an LP can gain short exposure after full traversal of a range order by depositing collateral above the market price to underwrite call or put options. This allows them to create fully-collateralised option pools with concentrated liquidity and partial collateralisation which improves capital efficiency. Additionally, they are able to use pro-rata fee growth for liquidity providers as well as integrations for strategic vaults and quote systems in order to further increase their profits from providing liquidty on this platform.
What is the difference between Premia v2 and Premia v3?
The main difference between PREMIA V2 and PREMIA V3 is that in the former, liquidity providers are fully collateralised option sellers by default but cannot select specific options on the volatility surface to underwrite. Instead they provide liquidity to the entire surface. On the other hand, with PREMIA V3 users can permissionlessly create pools for any strike (K) and maturity (T ) while also being able to concentrate their liquidity positions which allows them more control over pricing of each market as well as collecting transaction fees from traders taking liquidty.
Is Premia v3 the best decentralized options market in the world?
No, PREMIA V3 is not necessarily the best decentralized options market in the world. It has certain advantages over other existing protocols such as improved capital efficiency, composability and sustainability but there may be other platforms that offer better features or services than PREMIA V3.
What kind of users would be interested in Premia v3?
Users who are interested in creating permissionless option pools with concentrated liquidity, partial collateralisation, prorata fee growth for LP's and integrations for strategic vaults and quote systems would be most likely to benefit from PREMIA V3. This includes traders looking to take advantage of the improved capital efficiency offered by this protocol as well as developers seeking a more composable platform on which they can build their applications.
Explain to me what are range orders in Premia v3?
Range orders in PREMIA V3 are a type of order that allows liquidity providers (LPs) to gain different exposures. Each range order consists of three variables: user address, lower tick (τl), and upper bound (τu). These variables determine the LP's liquidity state as well as their accrued fees. Range orders can be placed above or below the market price, with four types supported by the exchange - sell-with-collateral, buy-with shorts, straddling the market price and uni directional orders which allow for complex position biases to be expressed.
What is the benefit of Split User Accounting in Premia v3?
The benefit of Split User Accounting in Premia v3 is that it allows for the tracking of long and short exposures separately. This means that liquidity providers can gain different types of exposure, such as both long and short positions within a pool, while still efficiently maintaining global state liquidity. It also enables traders to buy or sell option contracts through the provided liquidity without having to worry about liquidations occurring automatically on-chain.
What type of fees exist in Premia V3?
In Premia V3, there are two types of fees: transaction fees and capital usage fees. Transaction fees are paid by traders taking liquidity (takers) and split between LPs (makers) and protocol stakeholders at a rate determined by governance. Capital usage fee is charged to borrowers who take out loans from the margin lending pool in order to cover their option underwriting positions; this fee goes directly back into the collateral type's respective margin lending pool as profit for lenders.
How does settlement work in Premia v3?
In PREMIA V3, settlement of option positions occurs post-expiration. This is because options on the platform are European in nature and can only be exercised/settled after expiration. When an option position expires, it will first go through a split accounting system which follows traditional AMM pro-rata mechanics to determine how much liquidity should be returned or taken from each user's account based on their exposure at that time. After this process has been completed, funds in the reserve fund (if any) will then be utilised according to order of expiry date for all remaining liquidated positions with interest fees being paid by the Reserve Fund upon settlement.
Explain how Margin works in Premia v3?
In PREMIA V3, margin is used to ensure that users are able to cover their positions in the event of a price movement against them. The minimum margin requirement (M*) for each position can be calculated using the current market price and other variables such as collateral value (ν) and floor scaling parameter c = 0.03. This calculation will determine how much liquidity must remain within an option pool at all times in order for it not to get liquidated due to insufficient funds or exposure levels being exceeded by any user's account balance(s). Additionally, Initial Margin Requirement (M0) can also be computed from this equation which determines what amount of capital needs to be deposited into an option pool before trading begins on it - with higher M* values resulting in more conservative risk management strategies being employed by traders/LPs alike.
How do liquidations work in Premia v3?
Liquidations in PREMIA V3 do not occur automatically on-chain. Instead, they must be triggered by a third party liquidator who is rewarded with a fee derived from the size of the position that was liquidated. Automated software can also be deployed to monitor and trigger these liquidations but it will also be open sourced for other third parties to participate and compete for fees as well.
What is OTC Liquidity in Premia v3?
OTC Liquidity in PREMIA V3 refers to the ability for users to trade options off-chain, outside of the exchange. This is done through a network of liquidity providers who are willing to provide quotes and execute trades on behalf of traders without having them go through an order book or other automated market maker (AMM) system. OTC trading allows for more efficient pricing as well as faster settlement times since it does not require any blockchain transactions which can be slow and expensive at times.
What is a vault in Premia v3?
A vault in PREMIA V3 is a smart contract that allows users to deposit funds into it and earn interest on their deposits. These vaults are integrated with the protocol, allowing for strategic capital management strategies such as yield farming or liquidity mining. Vaults also provide additional security measures by locking up user's deposited assets until they decide to withdraw them from the pool - thus providing an extra layer of protection against malicious actors attempting to steal funds from other traders/LPs within the option pools.
Explain the difference between the base layer and the vault layer in Premia v3?
The base layer in PREMIA V3 is the core protocol that enables permissionless creation of option pools and provides liquidity, partial collateralisation, prorata fee growth for liquidity providers. It also includes integrations with quote systems to minimise fragmentation of liquidity across different strikes and maturities. The vault layer on the other hand consists of smart contracts which allow users to deposit funds into them and earn interest on their deposits. These vaults are integrated with the protocol allowing strategic capital management strategies such as yield farming or liquidty mining while providing additional security measures by locking up user's deposited assets until they decide to withdraw them from a pool - thus protecting against malicious actors attempting theft within an option pool.