Panoptic Launches Perpetual Options on Uniswap with Backing from Industry Leaders

Panoptic brings perpetual options to Uniswap v3 and v4, empowering LPs and traders with advanced risk hedging and trading strategies on any digital asset. With its Ethereum launch, the platform is now publicly accessible, supported by top-tier investors like Uniswap Labs Ventures, Coinbase Ventures, and Jane Street.

Welcome to the AD Derivatives podcast led by Director of Derivatives; Greg Magadini.

Featuring: Guillaume Lamber, CEO & Founder of Panoptic!

Panoptic integrates with Uniswap v3 and v4, offering perpetual options on all assets available on one of the world's largest decentralized exchanges.

Panoptic's Ethereum launch opens the platform to the public, unlocking new opportunities for LPs and traders to create calls, puts, perps, and advanced risk hedging positions on any digital asset on Uniswap.

Panoptic is backed by Uniswap Labs Ventures and other industry leaders, including Greenfield Capital, Coinbase Ventures, Jane Street, and Gumi Cryptos Capital (gCC).

Introduction to Panoptic

Panoptic is a novel DeFi protocol enabling perpetual options trading within the framework of existing decentralized liquidity pools. Unlike traditional options markets, Panoptic introduces flexibility and accessibility, empowering users to trade options on any asset with a Uniswap pool.

Background: Guillaume Lamber’s Transition from Academia to Crypto

Guillaume holds a PhD in applied physics and was formerly an assistant professor at Cornell University. His transition from academia to crypto was driven by his interest in mathematical modeling and decentralized systems like Ethereum. His experience in traditional options trading and research on AMMs inspired him to create Panoptic.

• Key Influences:
  • Early adoption of DeFi protocols like MakerDAO and Uniswap V1.
  • Experience trading traditional options through platforms like Tastytrade.
  • Insights into the similarities between Uniswap’s liquidity provisioning and options trading mechanics.

The Core Innovation: Perpetual Options in DeFi

Panoptic introduces perpetual options, a groundbreaking approach to options trading that eliminates expiration dates. This unique design simplifies the trading experience and allows continuous liquidity for users.

Integration with Uniswap V3

• Panoptic positions are directly linked to Uniswap V3 liquidity pools.
• Users can:
  1. Sell Options: Represented as liquidity provision in Uniswap pools.
  2. Buy Options: Achieved by shorting liquidity pool (LP) tokens.
• This dual-sided market creates flexibility for both advanced traders and beginners.

Optionality in AMM Mechanisms

• Impermanent Loss as Gamma Risk: The risk profile of liquidity providers (LPs) on Uniswap mimics that of selling options.
• Fee Accumulation: LPs earn trading fees analogous to options premiums.
• Shorting LP Tokens: Introduces the ability to manage risk using advanced strategies like spreads and straddles.

Technical Mechanics of Panoptic

Key Features

1. No Expiry Options:

   • Continuous rolling forward of positions, eliminating the need for expiration dates.
   • Fee structures replace traditional time decay (Theta).

2. Pre-loaded Strategies:

   • Users can implement advanced trading strategies like Iron Condors, straddles, and spreads.
   • Concentrated liquidity ranges in Uniswap V3 facilitate precise strike price selection.

3. Permissionless Market Creation:

   • Users can create options markets for any asset with a Uniswap pool, enabling new opportunities in niche tokens.

Risk Management and Liquidity

• Wider Ranges: Mimic long-dated options with lower Theta.
• Narrow Ranges: Resemble short-dated options with higher convexity but increased risk of being out of range.

Market Applications

Panoptic's protocol supports innovative applications across multiple asset classes:

ETH/BTC Pair Trading

• Panoptic enables ratio trading between wrapped Bitcoin (WBTC) and wrapped Ether (WETH).
• Traders can speculate on or hedge against directional movements in this high-liquidity pair.

Volatility Trading

• Panoptic allows users to trade implied volatility (IV), a rare feature in traditional markets.
• This enables speculation on volatility or hedging IV exposure.

Advantages Over Traditional Options Markets

1. Accessibility: Any token with a Uniswap pool can have an associated options market.
2. Decentralization: Eliminates reliance on centralized exchanges like CME or Deribit.
3. Continuous Liquidity: Perpetual options ensure no interruptions in trading opportunities.

Gamma and Theta Dynamics in Panoptic

Panoptic inherits a unique gamma profile similar to traditional options markets. The gamma intensity is influenced by the positioning and expiration of the liquidity ranges, with narrower ranges offering higher gamma but also elevated theta, translating to higher potential returns. This mimics the intricate trade-offs familiar to professional options traders while democratizing access to these advanced strategies for DeFi participants.

Investor and Ecosystem Support

With robust backing from Coinbase Ventures, Uniswap Labs Ventures, and other notable investors, Panoptic has charted a strategic growth trajectory. Initial development was propelled by seed funding rounds, starting as a research experiment and evolving into a comprehensive DeFi protocol. The project has consistently maintained close collaboration with Uniswap Foundation and Labs, ensuring seamless compatibility with Uniswap V3 and upcoming V4 functionalities.

Protocol Features and Innovations

Panoptic is not merely an options trading platform; it introduces a multi-faceted DeFi toolkit, including:

• Cross-Margining: Efficient collateral management across various positions.
• Risk Mitigation: Tailored insurance-like options to hedge against impermanent loss for LPs.
• Integrated Lending and Perpetual Protocols: Enhanced composability for diverse financial strategies.

This expansive feature set mirrors the sophistication of traditional financial systems while maintaining the transparency and accessibility of blockchain.

Auditing and Security Framework

Security is paramount for Panoptic. The protocol underwent extensive audits with renowned firms such as OpenZeppelin and ABDK, supplemented by four crowd-sourced reviews through Sertora and Cantina. Advanced invariant testing methodologies were employed, simulating millions of random operations to uncover edge cases and ensure robust smart contract behavior. The final code achieved zero critical vulnerabilities, setting a high benchmark for DeFi protocol security.

Integration with Uniswap Ecosystem

Panoptic has tightly integrated its operations with the Uniswap ecosystem. LPs are incentivized to migrate their positions to Panoptic, where they can potentially earn higher returns through options trading fees. A rewards program further amplifies these incentives, particularly for those returning to the Uniswap ecosystem. Panoptic will extend its capabilities to Uniswap V4 pools, ensuring future compatibility and expanded use cases.

Research-Driven Insights

Research forms a cornerstone of Panoptic’s development. The protocol continuously analyzes market dynamics, including implied volatility trends and arbitrage opportunities, to optimize performance and inform users. Public access to research findings ensures transparency and fosters community engagement.

Strategic Launch and Roadmap

Launched on Ethereum Mainnet in December, Panoptic has set its sights on Layer 2 integrations in Q1. This phased rollout allows for iterative improvements and user feedback assimilation. The protocol’s roadmap focuses on scaling adoption, refining the user experience, and exploring novel financial instruments to expand its market reach.

Future Outlook

Panoptic's permissionless framework is already seeing adoption, with users creating markets for tokens like Pepe and CowSwap. Its unique perpetual options model is poised to redefine DeFi options trading, offering a scalable, innovative solution for retail and institutional traders alike.