Thetanuts Finance (NUTS): The DeFi Solution for On-Chain Altcoin Options
The decentralized finance (DeFi) industry features a wide variety of trading protocols. While the most popular and well-recognized DeFi platforms focus primarily on token swaps or basic lending and borrowing operations, a sizeable segment of the industry serves the needs of more sophisticated traders.
Thetanuts Finance is a DeFi solution for altcoin options, allowing traders to go long and short and select both put and call options. Having begun in 2021 as a protocol focused on selling European out-of-the-money (OTM) options to accredited market markers, Thetanuts Finance radically expanded its offerings in early 2024 to cover both the sell side and buy side of the altcoin options market.
Besides options market trading opportunities, Thetanuts Finance offers additional yields through options premiums, automated market maker (AMM)-based liquidity provision, lending and borrowing and more.
Key Takeaways:
Thetanuts Finance (NUTS) is a multichain protocol that provides decentralized options trading and yield generation opportunities from options premiums, lending and AMM liquidity pools.
Using the protocol, traders can open both long and short positions for on-chain put and call options.
Its governance token, NUTS, can be bought on Bybit as a Spot pair (NUTS/USDT).
What Is Thetanuts Finance?
Thetanuts Finance is a multichain options protocol that supports both trading in altcoin options and a variety of yield generation opportunities linked to these crypto finance products. Its system operates on eight Layer 1 and Layer 2 blockchains, including the majority of the leading smart contract networks, such as Ethereum (ETH), Arbitrum (ARB), Polygon (POL) and Avalanche (AVAX).
The platform started out in September 2021, concentrating on selling European OTM options to accredited market makers. Protocol users earned yields from premiums on these options — i.e., when an accredited market maker bought options from Thetanuts Finance, the premium charged was distributed to owners of on-platform vaults.
Thetanuts Finance’s Development
The options vault market was a booming niche back in 2021 and 2022, with both institutional and retail investors joining the game and significantly boosting trading volumes and total value locked (TVL) figures. However, as the niche matured and became more competitive, focusing only on specific sell-side options opportunities was no longer enough for the protocol to grow further. Therefore, the project team decided to pursue a more diversified approach by introducing a wider variety of trading options and yield opportunities.
From late 2023 through early 2024, Thetanuts Finance implemented several protocol upgrades on the way to the launch of its version 3 mainnet. In April 2024, Thetanuts Finance introduced its third and final alpha version of v3. On May 20, 2024, the protocol launched its native token, NUTS, and as of late May 2024, the platform's v3 mainnet launch is imminent.
Thetanuts v3 is a comprehensive options protocol that offers buy and sell options, as well as additional yield sources via its Lending Market, AMM liquidity provision, options premium vaults and leveraged liquid restaking token (LRT) vaults. Traders and liquidity providers will also have additional yield opportunities via NUTS token airdrops and campaigns.
One helpful feature for beginning options traders provided by the platform is its Lite Mode interface. Using the Lite Mode, a trader can express their bullish view toward an altcoin option by selecting a long call on it. Alternatively, if bearish, the trader can choose a long put option. Lite Mode is an excellent way to simplify trading options without going too deeply into the details of all the available variations and alternatives.
Thetanuts Finance V3 Key Features
Basic Vaults
Basic Vaults generate yields for users in the form of options premiums. Every Friday, Thetanuts Finance offers European OTM options to off-chain accredited market makers. The premiums that are generated from the options sold at these auctions are distributed among the owners of Basic Vaults.
When you open a Basic Vault, you’re issued a liquidity asset — the Basic Vault LP token — that serves as a confirmation of your vault ownership, and can be used to generate additional yields within the Thetanuts ecosystem. Key additional yield opportunities include the following:
Providing liquidity to the platform's Lending Market
Providing liquidity to the Tethanuts AMM
Purchasing a long call or long put option by borrowing Basic Vault LP tokens on the Lending Market, and selling them on the AMM to capitalize on long volatility
Selling and closing your Basic Vault position immediately on the AMM
Lending Market
The Lending Market allows users to put their funds to further use by lending their Basic Vault LP tokens for additional yield. Borrowers access the funds provided by the lenders, and can utilize them in two main ways:
For long options positions: In essence, traders opening long positions on Thetanuts Finance borrow Basic Vault LP tokens, and then sell them on the platform's AMM.
For capital efficiency: Users who have supplied collateral to the Lending Market can borrow funds against their current positions on the market.
Thetanuts' Lending Market supports two types of assets — liquidity tokens originating on the platform, such as Basic Vault LP Tokens, and the USDC stablecoin.
AMM Overview
The Thetanuts AMM leverages Uniswap (UNI) liquidity pools, based on Basic Vault LP tokens and USDC, in order to enable traders to open long and short positions for on-chain options. The use of the AMM aligns with Thetanuts' v3 strategy of moving options trading activity to decentralized, on-chain sources.
In addition to supporting options traders, the AMM can be used by liquidity providers as a key source of yield. These providers receive a share of the trading fees proportional to the amount of liquidity they contribute. To add liquidity for call options, users need to deposit funds in Basic Vault LP tokens. For put options, they need to supply liquidity in USDC. The process of adding liquidity for call and put options can easily be managed via the platform’s dedicated Add Liquidity interface.
Leveraged LRT Strategy Vaults
Another area that Thetanuts has ventured into with the introduction of its third version is that of Liquid restaking tokens. Introduced by the EigenLayer protocol, liquid restaking offers an alternative to the popular liquid staking method that emerged after Ethereum's shift to proof of stake (PoS). While liquid staking allows users to stake ETH to help secure the network, liquid restaking goes a step further: EigenLayer enables ETH stakers to utilize their staked ETH to earn additional yield, essentially upgrading the benefits of liquid staking.
Thetanuts Finance has partnered with another yield protocol, Pendle Finance (PENDLE), in order to provide leveraged LRT restaking opportunities. Pendle allows its users to speculate on future yields by tokenizing and splitting LRTs into two separate synthetic assets: PT-eETH and YT-eETH. On Thetanuts' Lending Market, users can lock their PT-eETH for eETH yields, as well as for additional yields from premiums and NUTS token rewards.
What Is the Thetanuts Finance Token (NUTS)?
The platform's native cryptocurrency, NUTS, is an Ethereum-based ERC-20 token. Most of the token's utilities are derived by staking it to receive veNUTS, an asset that provides direct governance and value accrual opportunities. veNUTS holders can participate in governance voting and decision-making regarding platform changes and future direction.
Besides its staking and (indirect) governance functions, NUTS — again, via veNUTS — also serves as a value accrual asset. Liquidity incentives on the protocol are distributed in veNUTS, which can also be used to boost the rate of rewards and incentives earned on the protocol.
Total and maximum supply of the NUTS token are specified at 10 billion. The graphic below illustrates distribution of the total supply.
Following the token's launch in May 2024, Thetanuts Finance announced a month-long airdrop of NUTS to distribute the 3% of the supply allocated for this purpose. To be precise, the airdrop involves the distribution of veNUTS tokens. After a 90-day vesting period, these can be swapped for NUTS tokens at a ratio of 1:1.
Where to Buy the Thetanuts Finance Token (NUTS)
The NUTS token is available on Bybit through the Spot market as a swap pair with USDT (NUTS/USDT). Additionally, you can take advantage of Bybit's campaigns dedicated to the token for a chance to grab a share of the 3 million NUTS prize pool. The campaign runs from May 20 – Jun 3, 2024, and is split into two events: a Token Splash for new users to deposit and earn from a 2,500,000 NUTS Prize Pool, and a Trade to Earn 500,000 NUTS Prize Pool event where you can simply trade a minimum of 500 USDT worth of NUTS to qualify for participation.
Closing Thoughts
Thetanuts Finance is quite a distinct player in the market. The platform offers options trading opportunities and structured products for additional yield that can satisfy the tastes of the most sophisticated traders and liquidity providers. For a DeFi user who understands the options trading game, Thetanuts Finance provides plenty of options, no pun intended. Additionally, the platform's Lite Mode represents an innovative way for less advanced altcoin options traders to get a taste of this specialized market. As such, whether you’re a seasoned options trader or a relative beginner, Thetanuts Finance's product line deserves at least an initial look from you — and perhaps even more.
#LearnWithBybit