When we mention trading in crypto it usually refers to spot or leveraged trading on centralized exchanges but that whole perspective is slowly changing with the introduction of decentralized options trading platforms like Premia Finance.
With the introduction of decentralized options trading platforms crypto traders and investors have more tools to hedge against risk and trade their favorite tokens more freely without the need to perform a KYC verification or create an account on a centralized platform.
What Is Premia Finance? #
Premia aims to democratize options trading with the help of blockchain technology and decentralization. Instead of having one centralized platform that benefits from trading fees Premia enables anyone to become a liquidity provider and a trader.
Since creating an autonomous options trading platform is not as easy as it may seem, Premia Finance needed to include a few innovative features such as:
- Market driven options pricing – ensures optimal pool utilization at fair prices.
- Liquidity sensitive returns to LP – return on liquidity is calculated based on supply/demand in all pools. Higher demand = higher returns for LPs.
- Granular liquidity provision – liquidity providers can choose which pool they deploy their capital into.
- Self-incentivizing initial liquidity – lower slippage at the time a pool launches as well as higher returns, thanks to the automated pool pricing mechanism.
- Dynamic Premia token rewards – liquidity providers earn extra rewards in the form of Premia toknes based on the size of their position.
It is worth mentioning that this is a simplified overview and those that want to know more about the mechanism behind Premia Finance can find more relevant information in the documentation.
What Is The PREMIA Token? #
PREMIA is the governance token of Premia Finance and apart from governance rights it provides holders with passive income through xPremia staking. Rewards for stakers are generated through platform fees and depend on the general overall profits that the platform generates.
PREMIA has a total supply of 100M tokens and is distributed as follows:
- 30% Cross-Chain Liquidity Mining Fund
- 20% Development Fund
- 10% Safety / Insurance Module
- 10% Initial Distribution
- 10% Founder Allocation
- 10% Future Incentives Program
- 5% Marketing and Education Fund
- 5% Ecosystem Grants Fund
Staking is currently only available on Ethereum.
Benefits of Using Premia Finance #
The benefits of a decentralized options trading platform may not be evident at first glance but there are a lot of them. Platforms like Premia Finance make it very simple for traders to purchase and sell their options contracts.
Simply enter the future price you are aiming for, the expiration date and position size and the protocol will give you a price for the contract. Once bought you will easily find it in your portfolio but that’s not all.
With Premia Finance you won’t have to find a buyer for your contract if you decide to sell it before expiration. Normally you would list it on a marketplace and someone would need to purchase it but with Premia you can simply sell it back to the pool.
Right now, Premia Finance is available on Fantom, Arbitrum and Ethereum with plans to expand to Polygon, BSC and Avalanche in the future.
Premia Finance can be a very useful tool for both experienced traders and complete beginners. It opens up a lot of new possibilities to crypto investors and lets them hedge against risk while providing a user-friendly protocol everyone can understand and use.