[Premia] [FINAL] [STIP - Round 1]

Premia Blue Proposal: Arbitrum Short-Term Incentives Program Grant Application

SECTION 1: APPLICANT INFORMATION

Applicant Name: DK from Premia @dk3

Project Name: Premia Blue - Decentralized Tokens Options Exchange

Project Description: Premia Blue is a decentralized options protocol that offers unparalleled capital efficiency, user functionality, and composability. Its dual trading modes and market-driven pricing redefine what’s possible in European-style crypto options. Unique features including Smart Range Orders and Strategy Vaults, offer a seamless path for traders and liquidity providers of all levels to engage in crypto options trading.

Team Members and Qualifications:

  • DK: Operations & Strategy Lead
  • Lumyo: Smart Contract Lead
  • Rod: Web3 Architecture Lead
  • Froggie: Research & Development Lead
  • Cozy: Business Development Lead
  • Quantitative Finance & Financial Engineering: Wolfy, Professor, Elrond, Enso, Raj | Front End: Murai, Hihack, Rick | Marketing & Design: KB, Weka, Zane, Alex | Operations, Finance, & Legal: Beks, PJ, Magicks, Karlis | Business Development: Caesar | Smart Contracts: Courtney
  • Parliament: JCDenton, Horny, MJP, S64, Lyt, Sminem, Bathtub, Sidelined, Denpa, Fluffy

Qualifications:

  • Experienced team in building novel DeFi mechanisms and financial products
  • Successfully launched and grown Premia to over $375M in Notional Volume
  • World first DeFi Options Exchange to combine options products into a composable and fungible: AMM, Onchain Orderbook, Strategy Vaults, & RFQ messaging system.
  • The Premia team has strong expertise in DeFi, all heavy users prior to DeFi summer, with two members of the team previously in the top 100 degen score rankings. We are experienced in financial research, infrastructure management, & growth marketing. The team has over a decade of combined experience in both software development and financial engineering. We are well-versed in crypto-specific domains, including on-chain derivatives, options trading, and incentive program design. Premia conducts ongoing research to expand the capabilities of decentralized options trading as outlined in our multiple published research papers. → Research Archive

Project Links:

Contact Information

TG: @premiablue, @dk_premia

Twitter: @premiafinance, @dk3anon

Email: contact@premia.finance

Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes

SECTION 2: GRANT INFORMATION

Requested Grant Size: 900,000 ARB

Grant Matching: 550,000 PREMIA

Grant Breakdown:

  • [600,000 ARB] for option liquidity mining incentives (Vaults)
  • [200,000 ARB] for options trading volume incentives (Pools)
  • [100,000 ARB] for options liquidity mining (OLM) partner matching

Funding Address: 0xa079C6B032133b95Cf8b3d273D27eeb6B110a469

Funding Address Characteristics: Safe Multisig 4/5

Contract Address:
Current Vaults include Put and Call for ARB, ETH, & WBTC.
More vaults coming shortly before the grant program goes live.

Contract Address Link
pSV-WETH/USDCe-C 0xbae43c546DFADC69576aE73C68e0694A54F08e1B :link:
pSV-WETH/USDCe-P 0xD46993F25D298ebbCD31E941156C66f7e628A52a :link:
pSV-WBTC/USDCe-C 0x45dF5EA836A15B561937Ae8373ab9eE984aea531 :link:
pSV-WBTC/USDCe-P 0x6A1FC0E1c60BA6564CDe4910A425F1F1a1d18C1F :link:
pSV-ARB/USDCe-C 0xDC631d88dbB5eb39f5c4Bf8B4e5298d098912fFf :link:
pSV-ARB/USDCe-P 0xBe3E229319f86F5EE96EE1Dc0B6D55e8b68a439e :link:

The pools that will be incentivized as part of the active liquidity program (200k) will be created via the factory: 0xAE4fB6622F25f397587F11638dA8CE88C27b5645

SECTION 3: GRANT OBJECTIVES AND EXECUTION

Premia would use the ARB tokens to incentivize options trading volume on the Premia Platform.

  • A majority 600k would be used to incentivize vault deposits on the platform directly. This, in turn, will allow for more option writing. We will target 10mm in new Liquidity into the vaults and in addition Premia will also match 550,000 Premia Tokens as part of the Premia Option Liquidity Mining program during the same time frame. At current levels that is an approx yield of ~20% annually, plus premiums collected from trading and we think is a fair return for passive liquidity providers.
  • 200k ARB tokens would be used to incentivize traders that provide liquidity with range orders on the AMM. This will be calculated off-chain based on the volume traded, tightness of spread, and the pro-rata amount of range order liquidity provided within the most traded pools. This will be calculated in similar fashion to how Sushiswap & Angle Labs reward Liquidity Providers based on trading ranges.
  • 100k ARB tokens will be used to match Options Liquidity Mining for other Protocols that choose to launch an incentive plan (as available via stream). Premia calls this suite the Hydraulic Solutions Framework. For Arbitrum native projects that choose to launch an Options Liquidity Mining program on Premia, we will further incentivize their contributions from this pool.

From Premia Treasury: 500k ARB tokens would be directly deposited into the ARB CALL Short Volatility Vault, (funded by Premia Treasury) to enable more liquidity for ARB Call options. Any yield or premiums collected on this deposit would then be reinvested into the system via our Academy Learn to Earn program, which will be highlighted during our Arbitrum Odyssey Week.

Objectives:

  1. Increase daily options trading volume on the Arbitrum exclusive Premia Blue exchange by [500%] (Premia Blue just launched so 2mm daily is feasible)
  2. Attract [3000] new users to trade options on Premia Blue and Arbitrum through joint marketing campaigns with other Vol Products on Arbitrum (Rysk, Jones, Etc).
  3. Increase the Total Value Locked (TVL) in Premia Blue.
    • Incentivize LPs to provide [10mm] options liquidity
  4. Promote education on options trading through Premia Academy incentives
    • [5000] Number of Premia Academy course completions
    • NOTE: Premia will incentivize this via any premiums collected on the ARB vault deposit as well as the 300k already deposited from the Premia Treasury.
  5. Foster a robust community around the Premia Blue ecosystem.
    • Foster a strong community of options traders with [1000] new Discord members
    • Foster a strong community of options traders with [1000] new Twitter followers
    • NOTE: Premia will incentivize these two metrics via our Missions Platform and will be paid by the Premia Treasury, not the grant.

Key Performance Indicators (KPIs):

  • Increase in TVL & Volume
    • Options trading volume
    • Options liquidity provided
  • User adoption rate
    • Number of new traders
  • Community engagement metrics
    • Number of Premia Academy course completions
  • Arbitrum Transaction Volumes
    • Gas Spent with Premia Smart Contracts on Arbitrum One
    • Transactional Count by Premia Smart Contracts on Arbitrum Nova

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:

Receiving this grant would enable Premia to provide incentives for liquidity providers that may not enter the options space unless the juice is worth the squeeze. With additional liquidity, the pricing of options will be more competitive and in alignment with centralized exchanges like Deribit (Premia’s Order Book Fees match that of Deribit) and that in turn will help us streamline the process of attracting centralized exchange traders to dip their toes in DeFi. Premia is confident in our ability to establish relationships with both protail and institutional players, the current hurdle is the low vol environment, and the lack of onchain liquidity to the options space holistically. Additionally, we will continue to work together with other Options Protocols on Arbitrum to attract new informed & responsible vol traders. Premia has showcased their commitment to knowledge and education with their academy program that has over 2000 hours spent learning on the platform, and will continue to invest in and expand the academy offering.

Premia Liquidity Types

Fee Structure

Justification for the size of the grant: Premia has ambitious goals to utilize this Grant amount to expand the breadth of Options Traders in the Arbitrum Ecosystem. Based on historical platform volumes for the last 2 years on Arbitrum, as well as the requests from similar projects, we believe this to be a fair allocation, targeting modest returns, however happy to have an open discussion.

Execution Strategy:

  • Allocate 600k ARB to passive liquidity providers who deposit in the Vault products.
    • The 6 current vaults (more to come) emit tokens based on vxPremia voting allocations. Premia will utilize this allocation method to also distribute the ARB granted tokens.
    • Incentives will be distributed as streamed, moving from the multisig to the vaults on a regular basis.
  • Allocate 200k ARB to active liquidity providers.
    • Distribute pro-rata based on the user’s facilitation of the total volume on a biweekly cadence
    • This will allow for better pricing on ARB Call Options, and allow for other protocols to experiment with advanced cross protocol strategies having competitively priced premiums.
    • Any premiums collected from selling ARB call options will be reinvested into Premia’s learn to earn program to grow the userbase of responsible options traders.
    • Based on current deposit, this would increase pool liquidity 50% (as of today’s numbers)
  • Utilize the remaining 100k to match new Options Liquidity Mining Programs (OLM)
    • Premia built OLM in a modular way to easily spin up a new primitive to the traditional liquidity mining programs available. It allows for Protocols to spin up OLM easily, using the Premia suite of smart contracts and marketplace rails in a simple manner. There are a few protocols excited to utilize this new feature set after Premia goes live with their program this week. Below is an example of one way this primitive can be used.

Grant Timeline:

  • Start: October 15, 2023
  • End: January 15, 2024
    To be allocated to the various initiatives as streamed.

Risk Management:

  • Regular audits and auditor on retainer to review all PRs
  • Community governance for major protocol changes

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? [Yes]

SECTION 4: PROTOCOL DETAILS

Is the Protocol Native to Arbitrum?: Yes
Initially launched on Ethereum before Arbitrum availability. Premia Blue (formerly Premia Finance) is now solely Arbitrum Native (One and Nova).

On what other networks is the protocol deployed?: Premia Blue (V3) is only available on Arbitrum One, with the order book living on Arbitrum Nova

What date did you deploy on Arbitrum?: November 2021

Premia is a DeFi options protocol native to Arbitrum, initially launched in February 2021. It is currently the leading native options exchange on Arbitrum, with over $375M in total notional value transacted. Premia is the only exchange with an onchain order book which resides on Arbitrum Nova, bringing the best of Arbitrum’s protocols into a cohesive and transparent options platform. In the past Premia V2 was deployed on multiple chains; however, with the most recent enhancement, Premia Blue is exclusively consolidated on Arbitrum.

Premia Blue (V3) Architecture

Premia’s Orderbook compared to Centralized Exchanges

Protocol Performance & Key Milestones:

  • [5,000+] unique traders
  • [5,000+] unique academy participants (over 2000 hrs spent learning)
  • [$375M+] in cumulative options volume
  • First and Only platform to support Arbitrum Token Options
  • Arbitrum Native, and the omnichain strategy will continue to consolidate on Arbitrum
  • Only DeFi Options platform to support Zero Liquidity Options Markets, Premia’s trusted ZL surface has allowed it to create vaults for tokens with no mature options Market (like ETH and BTC).
  • DeFi first and only permissionless options protocol. Can support any ERC20.

Last Year Volumes
Migration occurred to V3 in September, thus lower than average volumes.

Top Options Platform on Arbitrum (and expected to ramp up in Q4 with the onboarding of the first onchain Options Market Maker!)

Volume from 26 Sept 2023 (yesterday)

Protocol Roadmap:

  • Expanding market maker and institutional liquidity through partnerships with quant funds, prop shops, natural hedgers, and protocol treasuries.
  • Launching additional strategy vaults and advanced trading features like spreads to sophisticated options strategies accessible to everyday users. Vault strategies are designed to maximize capital efficiency.
  • Building an omni-chain presence across Ethereum, L2s to provide traders access to the most liquid and cost-efficient markets, with all execution, matching, & settlement happening on Arbitrum
  • Fostering additional composability by integrating with lending protocols for margin trading and enabling third-party protocols to tap into Premia’s liquidity pools.
  • Developing the protocol’s capabilities through research and standards development for decentralized options.
  • Expanding educational content and quests on Premia Academy to lower the barrier to entry for new options traders. Easy onboarding will drive adoption.
  • Launching mobile-friendly interfaces and integrating with wallets to make the platform more accessible. A focus on user experience helps attract new users.
  • Creating novel incentives like trading seasons and leaderboards to engage the growing Premia community. The emphasis is on building a vibrant ecosystem.

Audit History: All Audits can be found linked here.

SECTION 5: Data and Reporting

Currently available on DeFi Llama; however, extensive metric reporting for V3 is in development for release in the coming weeks.
DefiLlama Options Volume
DefiLlama TVL
DefiLlama Fees
With Token Terminal to be updated mid-October.

Is your team prepared to create Dune Dashboards for your incentive program?: Yes

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread? Yes

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: Yes

Premia will provide a dashboard tracking daily options volume, liquidity, number of traders, and other metrics for the incentive program. We will also provide bi-weekly updates on the forum.

8 Likes

As a regular Premia user and Defi enthusiast, I support this proposal. Options are essential derivatives on the Defi space, and we need to support tomorrow’s Defi blue chips protocols like Premia. I fully trust the team in making good use of this allocation, which will benefit the development of the Arbitrum ecosystem on the long term in the same way as GMX did on the futures market.

2 Likes

I think this is deserved. A protocol that really strives to do something beyond the norm. The only notable project I know with American Style Options and has been on Arbitrum a long time. Some Arb could go a long way to pushing them - making them competitive with centralised options platforms, as seen above.

All the best.

4 Likes

Hello @0xLamps thank you for your application!

Unfortunately, the following section of your proposal does not comply with the program rules as grant funds may only be used to incentivize Arbitrum contracts and can not be used directly as liquidity.

1 Like

Okay we will fund this from our treasury then, will update proposal this weekend.

3 Likes

Great proposal. Let’s make options great again!

Always ready to collaborate with Premia on educating and on-boarding new traders into options space! :handshake:

3 Likes

The Premia team’s experience and track record in the DeFi options space are commendable, especially in successfully launching and growing Premia to a notional volume.

This proposal is well deserved and should definitely get a Big Yes from the arb community.

1 Like

Okay, this has been amended now, Thanks!

4 Likes

Great @dk3 @Arbitrum_moderator
I’m in.

2 Likes

As a premia and arb user I approve this!!! Yayayayayay

2 Likes

Thank you for these changes! Your submission now meets all requirements to be considered for a snapshot vote.

3 Likes

Great detailed data-driven proposal delivering a really strong product with a capable team fully support them

2 Likes

Yes. Yes. Yes. 100x Yes.

Premia team has built an incredibly innovative protocol and are leaps and bounds above any other decentralised (or centralised for that matter) Options in the space.

2 Likes

Premia been on a few different chains but I acknlowedge that they are now trying to focus more on Arb.

The amount seems reasonable for the contributions they have made and the time they have been building on ARbitrum.

Hey @dk3

The data shows “changes” at 0%, does the image correspond to the time of deployment of a new version? or because there is no previous data?

Would you be willing to lower the requested Grant Size, both the volume and the TVL of the protocol are very far from the ranges referred to for the Lighthouse Grant?

Do you want to describe to me what you think are the main competitive advantages over Lyra?

1 Like

Hello @dk3 ,

Now that your application has been marked eligible, please be advised of the remaining steps in the application process to be completed prior to the Review Period Deadline:

Please complete the following steps required for your application to proceed to Snapshot:

Once you change your proposal title to final, please tag an Arbitrum Foundation Forum Moderator (@ stonecoldpat @ cliffton.eth @ eli_defi) by the Review Period deadline to notify them of your proposal’s readiness.

Once marked as [Final], your application post will be locked by moderators and you will no longer be able to edit your proposal.

Pretty sure no one can change the topic name from [Draft] to [Final] based on permissions right now.

2 Likes

@dk3 Sorry for the confusion!

To change your proposal to final, please tag an Arbitrum Foundation Forum Moderator (@ stonecoldpat @ cliffton.eth @ eli_defi) by the Review Period deadline to notify them of your proposal’s readiness to proceed from [Draft] to [Final] status.

Once notified, the Arbitrum Foundation Forum Moderator will adjust your title from [Draft] to [Final] status. Once marked as [FInal], your application post will be locked by moderators and you will no longer be able to edit your proposal.

1 Like

Hello @stonecoldpat @cliffton.eth @eli_defi - Think we are ready to move to [Final]. I will be traveling tomorrow, so hopefully you can help me out before I become unavailable.
Thanks!
DK

5 Likes

Blockworks Research is inclined to support this proposal on the condition that the requested amount comes down from 900K ARB to 750K ARB based on, among other things, the anticipated sustainable impact on, and goodwill to, the ecosystem, metrics such as TVL / volume / fees on Arbitrum and overall, a comparative analysis of all submitted STIP proposals, the distribution of incentives across verticals, as well as, to a certain extent, the recommendations made by the Arbitrum Working Group through the four grant categories.

1 Like