A New Era of DeFi Incentives: How Options Liquidity Mining is Redefining the Game

High Rollers:

Cheers,

The Rollup

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A select few DeFi teams are pioneering a new incentive program which is rapidly solving the “something for nothing” problem of yield farming…

Over the last few years, liquidity mining programs were filled with endless token emissions and choas leading to an unsustainable token price and yields.

This came to an abrupt halt with the recent bear market.

However, a solution is slowly rising from the ashes…and if I’m right, this has the potential to be a massive development for the long-term sustainability of DeFi as we know it.

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Options Liquidity Mining (OLM) is a solution inspired by DeFi visionaries and now being executed by Bond Protocol
to level the playing field & redefine how protocols incentivize users.

Here’s what I mean.

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OLM introduces an approach that allows protocols to mint & distribute customized oTokens.

These ERC-20 call options come w/ tailored configurations, giving projects flexibility to optimize their emission strategies.

OLM opens the door for all projects, regardless of their size or maturity. Unlike other solutions, they eliminate reliance on oracles, making OLM accessible even to newer protocols that may not meet the traditional requirements for obtaining a reliable oracle.

We all know how expensive Chainlink oracles are ($1M+ per year).

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At a high level, when a protocol integrates with Bond Protocol they are able to use call options as they reward token for users.

This incentivizes users to not farm and ???? instantly as they have a bet on the upside of the token. It aligns stakers and options holders (LPs) in the same boat.

No one wants to dump because they don’t want their options to expire worthless.

So, what happens with exercising/expiring?

• Exercising Options: oTokens can be exercised within the eligible & expiry dates, at a fixed strike price. The issuer recoups the quote asset strike price required for exercise, while the purchaser receives the upside payout.

• Expired or Unexercised Options: In this scenario, the issuer can reclaim the payout collateral provided to mint the oTokens. No need to pay out liquid incentive tokens, minimizing downside risks.

To showcase the effectiveness of OLM, we’ll use benchmark results from the original implementation by Keep3r Network.

Through OLM, Keep3r Network captured substantial value during the bull market and continued thriving even during the bear market.

The chart below showcases their fees’ resilience and growth, proving that OLM empowers protocols to retain value and sustain growth regardless of market conditions.

This mechanism is allowing for sticky liquidity, a more stabilized token price and maintaining a healthy treasury.

Bond Protocol is pioneering their pilot program with Rodeo Finance, unsheth_xyz, and The Standard_io ????

I am super excited to see how this plays out and will be happily recommending this method of LM to many teams in our network should it be a resounding success!

As we continue to see DeFi innovate, we will see more sustainable, longer-term solutions rise to the top as the speculative nature of DeFi slowly thins out.

I’ve had a fun time exploring this concept with Bond and their team as a content creator and researcher for their development!

So, what can you do, anon?

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