extended this idea further, creating an instrument that provides option-like exposure without fragmenting liquidity by strike or expiry. Power Perpetuals, in fact, are a specific type of perpetual future where the underlying asset is raised to a power, most commonly two, providing nonlinear exposure that's more akin to an option than a future. The most prominent example is Opyn’s Squeeth, a perpetual future on ETH squared.
Decentralized structured products shine as a relative bright spot in the decentralized derivatives ecosystem, commanding a larger percentage of market share than other decentralized solutions in the crypto futures and option markets12. Protocols like Ribbon and Thetanuts have found success in the simplicity of their DeFi Option Vaults . Unlike trading options directly, DOVs enable users to gain short option exposure without having to choose amongst expiration dates or strike prices.
While short option vaults were the first mover and remain the clear TVL leader today, long option vaults with principal protection catering to more risk-averse investors have come to fruition in recent months. Ribbon unveiled two new vaults under its Ribbon Earn branding that strive to protect invested capital while retaining a degree of upside participation.
Lastly, it's important to note that the ‘principal-protected’ label commonly used refers to protection from market risk, but users still bear various forms of other risks. For example, lending to a centralized counterparty bears credit risk while gaining yield via staking or AMM-based lending adds additional smart contract risks.
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