Options Automated Market Maker Lyra Deploys to Arbitrum Network

With the Newport upgrade, Lyra is now integrated with GMX perpetuals, allowing users to benefit from improved capital efficiency and user experience.

AccessTimeIconFeb 3, 2023 at 9:07 p.m. UTC
Updated Feb 3, 2023 at 10:00 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Lyra, an automated market maker for crypto traders to buy and sell options, is now a multichain protocol after successfully launching its Newport upgrade earlier this week.

Initially only running on Ethereum layer 2 chain Optimism, Lyra has expanded to Arbitrum, another layer 2 platform, and integrated with decentralized exchange GMX perpetuals, a derivative trading product without an expiration date.

"Paul," a core contributor for Lyra, told CoinDesk, “One of our main drivers of launching on Arbitrum and GMX is that we noticed that there were distinct communities forming on each chain. There are users that only use Arbitrum and users that only use Optimism. We realized it doesn’t really make sense to just wall ourselves off to only one subset of users.”

Before the upgrade, Lyra’s market maker vaults (MMV) paid swapping fees for every collateralization and hedging trade. For example, when a trader buys a call option contract on ether (ETH), Lyra’s MMVs would purchase ether from a spot exchange, incurring a fee. Once the trader’s position has closed, Lyra’s MMVs would sell back the ETH used for collateral, incurring yet another fee.

As a result, the process was inefficient and liquidity providers in Lyra’s MMVs had lowered yields from the swapping fees.

Now, Lyra’s MMVs don’t need to swap the base asset like ETH to collateralize or hedge every time a trader buys an option contract. Instead, options are now partially collateralized in cash, while Lyra hedges its exposures by using GMX perpetuals as a source of liquidity.

As a result of the Newport upgrade, the Lyra Twitter account indicated that swapping fees “should be reduced with cost savings passed onto [liquidity providers] in the form of higher yield from the same amount of trading volume.”

Total notional trading volume on Lyra passed $1 billion for the first time on Jan. 16, and in the past 30 days, Lyra’s trading volume increased 8.4%.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Sage D. Young

Sage D. Young was a tech protocol reporter at CoinDesk. He owns a few NFTs, gold and silver, as well as BTC, ETH, LINK, AAVE, ARB, PEOPLE, DOGE, OS, and HTR.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.