A hedging instrument for decentralized finance (DeFi) has closed a $2.16 million funding round, led by Dragonfly Capital, with participation from 1kx, Version One Ventures, CoinFund, DTC Capital, Uncorrelated Ventures and A.Capital.
The funding is for Opyn, which offers crypto-based derivatives, beginning with the oToken, which is a permissionless hedging instrument. The company reports $36 million in trading volume since launch. Others in the funding round include angel investors Balaji Srinivasan, formerly of Coinbase; Robert Leshner, founder of Compound; and Linda Xie, also a Coinbase alum who co-founded Scalar Capital.
Crypto getting down with the risk management business sounds like the death knell of the punk-rock era of the industry. On the other hand, as projects like Opyn become more robust they will create ways for thesis-driven investors to make money via contrarian positions, and that could be very punk rock.
With the surge in demand for the COMP token, many users may have funds that would normally be in cash rather than crypto right now, which could feel risky for users. The ability to insure their USDC deposits on Compound might now be unusually attractive.
Opyn offers oTokens, which are basically insurance policies, but without insurance adjusters. So here’s how a user would insure their USDC using the product. An oToken would allow them, for a small fee, to recover most of the investment’s value if they turned in the underlying token.
So a user could insure $100 in USDC for $95. The user could unlock the $95 in collateral on their oUSDC token but they would have to turn in 100 USDC to do it. They can do this at any time without any kind of check or verification.
“Opyn is starting a new chapter in DeFi by unlocking options and offering a new and powerful financial primitive that brings stability to a historically-volatile market,” Tom Schmidt of Dragonfly Capital Partners said in a press release.
The company is working now on v2 of its platform, which will include many new kinds of options.
“This release will include margining for capital efficiency, enable options spreads and combinations positions, and create the infrastructure to add governance down the line,” co-founder Alexis Gauba told CoinDesk. The update should be released later this year.