Option market for crypto?

New Binance-Backed DeFi Site Lets You Earn Yield on Bitcoin, Other Non-Ethereum Assets


The product, called Harvest and built on the Kava blockchain, allows users to stake their crypto so it can be lent out to other users. Harvest will initially support deposits of BTC, BNB, BUSD and XRP. Soon, Kava Labs plans to debut automated market makers (AMMs) like Uniswap and robo-advisors like Yearn.Finance on the blockchain as well, said Kava Labs CEO Brian Kerr.

Similar to DeFi platform MakerDAO, Kava will allow users to create collateralized debt positions (CDPs) on the Kava protocol in exchange for a stablecoin, USDX, pegged one-to-one with the U.S. dollar. Unlike Maker, though, Kava works with assets outside the Ethereum ecosystem that have largely watched the DeFi craze from afar.

I did not completely read this, but it sounds like a Black-Sholes model as the crypto collateral will need be committed for a time period.  The major ctypto, like bitcoin and eth have market share, that is there are financial uses of them. So they have an equivalent liquidity, an ability to respond. Bitcoin, for example, construct the ideal model of a bitcopin s/l that simply does interest swaps between bitcoin deposits and loans.  That ideal model, if you can make the transform, lets one cancel time and treat dollar liquidity in balance with bitcoin liquidity. That answer should be proportional; to market share.

But it brings up a point I have often made, if the S/L handle clearing properly, there a bitcoin S/L is perfectly feasible with a probability of loss very low, but positive. But the trading pits needs to be Spectre controlled, it has to be the hot wallet and traders are bots with fair banking contract.   The pit boss hold all the double spending capability in the market account, it is essentially double spending to some small, bound variation.  But the double spending is cleared for each trader on entry and exit. If the pit boss collapses, it does so in steps and no one is at risk for more than a quarter point, maybe a half point.  

The bicoin S/L is like me banking at the corner grocer. We have been doing it for years, saved a ton of Swift transaction taxes. If one or the other of us dies, we maybe lose fifty bucks on the account. The risk is low.