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Polynomial Protocol

Highly Efficient Options Liquidity Protocol using UMA and Uniswap v3

Polynomial Protocol

Created At

HackMoney 2021

Project Description

Polynomial Protocol uses Uniswap v3 to create deep liquidity for option contracts. Call Options are created using UMA protocol's Long Short Pair library. Uniswap v3 liquidity for options are managed by Polynomial Protocol and rebalanced frequently using Black Scholes pricing mechanism

How it's Made

(Only available on Kovan)

The smart contracts are written using Solidity and Frontend is built using Svelte.

The smart contracts interact with Uniswap v3, UMA and Chainlink.

  • Call options are created using UMA's Long Short Pair synthetics with the help of Covered Call FPL

  • Call option minters can choose to create a Uniswap v3 pool of 1% fee. Users don't need to worry about pricing the option as it is taken care by the protocol using Black Scholes pricing mechanism

  • Uniswap v3 liquidity managed by the protocol, and frequently rebalanced as the time goes on. In each rebalancing, with the help of Black Scholes pricing mechanism new pricing range is calculated (corresponding pool ticks). And the liquidity is migrated to the new pricing range.

  • Spot price required to calculate the Black Scholes is fetched by Chainlink Oracle

This mechanism creates deep liquidity for UMA options with the help of Uniswap v3

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