Arrow DFMs: Options Markets On The Avalanche Platform

While the decentralized finance market has been plagued with high risk, high yielding options to put funds on (like the food DeFi epidemic earlier this same year), there has been a drought of more professional, more institution catered options for investing, akin to traditional instruments. This is the market that Arrow, a research group founded by Edward Mehrez and Patrick Keefer, both PHD in Economics, that have seen the opportunity in DeFi options to democratize and expand the access of normal users to these applications.

The Arrow Research Group envisions envisioned a DeFi protocol for expanding the world of options to end users through the use of its DFM concept. A DFM (an acronym that stands for Decentralized Financial Market) is an instrument that lets users create on chain markets for options, and allows users to leverage these instruments to “farm” these options while assessing a determined level of risk. In a way, it can be defined as an options market maker of sorts.

One of the most interesting traits about this proposed platform is the power it provides to its users, which will be capable of creating option markets for virtually any underlying assets, providing there is liquidity interest in doing so. This also brings another interesting, derived advantage to the table: any traditional asset will be able to be traded 24/7 via their corresponding derivatives on chain, instead of limiting its market to traditional times, something that is quietly becoming the norm now that stocks are also being offered in cryptocurrency based exchanges like Uphold.

Stablecoins and Tokenized Assets and Use Cases

There are a number of use cases that range from limiting exposure to price changes in any portfolio, to speculation on any other cryptocurrency like BTC or ETH. However, the star use case for simple end users is the ability of “farming” options, allowing anyone to provide liquidity as tail collateral in a pool while earning income in the form of fees for any operation other users do in the active DFM.

Weapon Of Choice

Also, it’s not only the throughput that counts. Launching on the platform will allow DFM’s to be actively traded in decentralized exchanges (DEX) that are already being constructed, providing a market to trade buy and sell them. The Avalanche has also shown its interoperability with other protocols (such as Ethereum), so scaling to other chains could also be possible in theory.

While Arrow is still in its early stages, actively developing its platform to make it easier to use, it has plans to support USD, AVAX, BTC, and ETH based decentralized financial markets in a first wave, with other markets being added at a later date. The use cases of the project cater it to the institutions more than the end users, a trend we will likely be observed in the next year with new development trying to grab a niche market during the bull stages of the market that is developing right now.