Introducing Haptic
Decentralized exchanges are one of the largest verticals of the DeFi industry and Uniswap is one of the dominant players, with over 1 trillion dollar in cumulative trading volume. Uniswap democratizes access to market making by leveraging a unique, unstoppable and non-custodian architecture.
However, Uniswap V3’s liquidity providers are exposed to a risk profile akin to selling options while not receiving sufficient reward in terms of return on their investment. Additionally, concentrated liquidity positions are notoriously hard to manage and existing liquidity tokens cannot be used as collateral for other financial instruments, except for a few selected cases.
This is in contrast with the emerging industry trend which sees the use of LP shares for creating derivatives exposure and, more generally, the on-chain option niche, which is quickly becoming a key component of the DeFi ecosystem.
In fact, as of 2023, crypto derivatives continue to grow exponentially, with around $3 trillion of total volume exchanged. With crypto on the verge of mass adoption, the derivative market will keep expanding and demand will undoubtely grow for exotic options and more sophisticated types of instruments.
Overview
Originally conceived as a peer-to-peer binary option protocol, Haptic is a type of automated market maker (AMM) for exotic options backed by LP shares. The protocol combines automated liquidity management (ALM) vaults with always-on option markets — available for any asset/stablecoin token pair traded on Uniswap V3, including liquid staked assets.
At a higher level, Haptic vaults manage different underlying strategies on Uniswap V3 pools and provide settlement functionalities for the underlying option markets. Our unique option AMM design taps into the liquidity available in the underlying Uniswap V3 positions to deliver trustless settlement of options that are 100% collateralized at all times.
Exotic options
Exotic options is an umbrella term used to define a class of option contracts with different payout structures and characteristics from those of plain vanilla types such as American or European options.
Binary options are a type of exotic contract that guarantees a payment based on the occurrence of a certain event. Barrier options similarly yield a payoff based on the occurrence of a certain event, but only become activated (knock-in) or deactivated (knock-out) if the price of the underlying reaches a pre-agreed level before the option expires.
Haptic options or haptos combine characteristics of both binary options and barrier options and are collateralised under-the-hood by Uniswap V3 liquidity positions.
Why use Haptic?
Haptic compounds the revenue stream of Uniswap V3 liquidity provisioning with with the premium earned from passively market making exotic options. This represents a novel way to generate yield on crypto assets and a new type of DeFi primitive. Our unique AMM design taps into the liquidity available in the underlying Uniswap V3 positions to deliver trustless settlement of exotic options that are 100% backed by collateral at all times.
- For Liquidity Providers
Haptic vaults allow liquidity providers to get exposure to automated strategies on Uniswap V3 and simultaneously on our unique automated market maker for exotic options. Liquidity providers can choose from a selection of vaults and strategies and choose to interact with their liquidity, consult the return on investment or watch the vaults metrics. - Traders
Haptic allows trading of exotic options without trusted intermediaries and with transparent execution. This fact alone is a huge advantage over traditional options markets, because traders do not have to trust the exchange to execute their orders and settle contracts in a fair way.
Haptic options are easy to understand and can be customized according to the user’s need, which makes them a great tool for hedging and risk management.
Option trading on Haptic
Haptic leverages smart contract technology and a oracle-free settlement to make binary option trading on Haptic carry significant benefits over traditional markets. Here are the main advantages of trading options on Haptic:
- Transparent pricing & settlement — Options traded on Haptic are priced using our on-chain model which guarantees transparency. In addition, settlement of contracts does not depend on an individual price source, which reduces exposure to manipulation.
- No siloing — Haptic options are backed by Uniswap V3 liquidity shares, as opposed to funds segregated on a smart contract. This allows Haptic to benefit from the deep liquidity available on Uniswap V3 seamlessly.
Keeper
To work correctly, Haptic requires real-time monitoring of the protocol and triggering of on-chain functions. The role of the keeper is to carry on these actions in change for a reward. Keeper tasks include the following:
- Option pricing — As options are created, Keepers fetch the premium on-chain from Haptic smart contracts and submit it to the AMM via a separate call.
- Option settlement — Keepers call settle when an underlying liquidity position becomes out-of-range. This action triggers any outstanding settlement and rewards keepers with a percentage of the option premium.
Haptic Token
The Haptic Token will have several uses ranging from governance to incentive structures:
- Governance: Token holders can participate in decision-making processes by voting on proposals. This includes managing protocol parameters and guiding the protocol’s direction, ensuring that our system evolves with the community’s input.
- Staking incentives: Staking Haptic token will unlock trading boosts and other perks. These rewards are structured to encourage active engagement and improve customer fidelity.
- Rewards for contributors: The token is used to reward protocol actors such as Keepers. This approach aims to maintain a healthy and dynamic ecosystem by leveraging game theory in order to guarantee fairness of operations.
- Driving adoption: The Haptic token will be used to incentivize new users to join and engage with our platform. By aligning user activities with rewards, we aim to boost participation and grow our community.
Roadmap
As we approach the target for a soft launch, we are working in partnership with Shieldify to battle test our pricing model and design a robust incentives mechanism and emission policy. This will help us making informed decisions while finalizing our tokenomics and protecting the interest of the protocol and our stakeholders.
At the same time, we’re working with a team of experienced developers to produce a next-generation user experience, aiming to create a more intuitive and engaging platform for our users.
The aim is for a soft launch on the Optimism network some time around January — February 2024. Don’t forget to join our Discord community and follow us on X, engaging early means access to extra perks and rewards!
Also, checkout our docs (work in progress) to learn more about the protocol!
Partners & Sponsors
