SIP-12 Consolidate USDC liquidity in WETH Puts pool

Abstract

Puts and Calls in crypto are not symmetrically opposite. They serve different purposes:

  • Calls are typically used to bet on an alpha in a particular project: usage growth, buybacks, new products or partnerships announcements, etc.
  • Puts, on the other hand, are used to protect against broader market downside movements. It is rare to see traders shorting specific tokens of legitimate projects in this market. Current near-0 open interest in Siren’s Put pools validates this point.

ETH can be seen as a proxy for broader DeFi market index. As such, it would be valuable for Siren community to have a deep liquidity and strike/expirations selection in the ETH Puts pool. This will enable market participants to efficiently hedge their broader market exposure while staying net-bullish on DeFi.

Proposal

WETH Puts pool, which is denominated in USDC, was launched last week and is currently in a bootstrapping phase. We propose to extract USDC from the unused put pools for other assets and consolidate all of Siren’s Puts liquidity in the WETH pool.

In order to do so we propose to discontinue SI rewards for other puts pools (SUSHI, YFI, UNI) which have 0 or near-0 open interest so far. The rewards will be reallocated to incentivize deeper USDC liquidity in the WETH Puts pool.

6 Likes

Sounds sensible to me. Crypto people are still relative risk-on and we are currently over-spending on put option pools that haven’t had any open interest in months (not even during the recent panic). So I don’t see any downside.

:+1:

Upvote :+1:makes perfect sense to me

I like the idea of pooling USDC in this way. I support this proposal.

Data don’t lie. It is better to discontinue the rewards to pools that do not see any traction in terms of increased OI during a couple of weeks/months and allocate the funds elsewhere. I support the proposal.

Good logic, makes sense to me. WETH pool needs sufficient liquidity and if this is a means of attaining it then let’s go do it!

Please follow the SIP format and procedures as outlined in SIP-1 - https://github.com/sirenmarkets/SIPs/blob/master/SIPS/sip-1.md