DeFi Protocol Divergence to launch public sale on SushiSwap Miso

Fast-growing DeFi protocol Divergence has revealed that its highly-anticipated IDO for its native token DIVER will take place on September 20, 2021. 2% of the total supply of DIVER tokens will be available via a Dutch auction on SushiSwap’s MISO launchpad. Participants will be able to become early holders of the DIVER tokens and have the opportunity claim from a pool of 256 non-fungible DIVΞR tokens, the first batch of NFTs ever released by Divergence. Once the IDO is completed, DIVER tokens will be available for trading on SushiSwap with more listings expected to occur in the future. 

DIVER is the governance token that powers the Divergence ecosystem. It serves as an economic incentive for the Divergence community. Token holders will be able to stake DIVER tokens and get rewarded.  

Divergence has also agreed on strategic investments from Huobi Group, the investment arm of Huobi Group. Huobi Ventures joins a list of strategic investors including AscendEX in supporting the Divergence Protocol. 

Speaking on the development Huobi Research Analyst, Alex Dong stated that it was a no-brainer for the investment company. ‘’To us, we solidly believe Divergence Protocol would be one of the most important pieces in the Defi puzzle’’. He added. 

What is Divergence  

Divergence is a decentralized platform for volatility hedging and trading which focuses on blockchain native asset prices, LP tokens, interest rates, DeFi farming, and staking rewards. Divergence also offers traders the opportunities to gain synthetic volatility exposure to decentralized assets that are not readily available in traditional crypto markets.

Users have permissionless access to create customized binary options markets. They can earn volatility premiums in addition to the lending and liquidity farming yields received on other protocols. 

Divergence road map contains significant products, including binary options, index derivatives, and yield vaults that incorporate volatility trading strategies.

Why Use Divergence

Divergence is designed to bridge the gap in the provision of easy-to-use volatility hedging tools onchain. Its approach is to build an AMM-based binary options market, which is the flagship product of the Divergence suite of derivatives offerings. 

Binary options are not new in the crypto trading sphere. This type of option enables non-linear exposure to fluctuating prices of DeFi assets. It allows traders to build leveraged positions in digital assets at a lower cost than making outright transactions.

At settlement, it offers a fixed payment instead of theoretically unlimited payment of standard options. This limits the risks of options selling. The simple pricing mechanism of binary options allows a predetermined number of tokens to be exchanged at expirations between buyers and sellers. 

Divergence builds on the concept of this type of option to create a simple yet powerful mechanism. It simplifies the market-making and trading process within its pool. Binary calls and binary puts — identified as Spear and Shield tokens on Divergence — are quoted in collateral units and add up to single collateral.

Retail traders can easily understand and account for the risk-reward of these options. They always pay a fraction of the collateral for an option and get paid a maximum of one collateral if they make the right prediction. 

Unique AMM-Driven Synthetic Options Market 

Divergence provides users with plenty of possibilities for customizing their positions. Using its AMM pools, LPs can permissionlessly create synthetic derivative tokens via a one-step minting and seeding process.

Only one type of collateral is used per pool. Peer-to-pool swaps occur in the same smart contract pool where the options market is created. Divergence’s options AMM market is unique in that it has: 

Composability: Liquidity providers can write binary options with any fungible token as collateral, including LP tokens of other DEXes. This significantly increases capital efficiency for traders and allows for flexibility to create, say, a SUSHI/USD options market using xSUSHI. This is not easily done on centralized trading platforms. 

Continuity: Divergence pools auto-exercise trading positions. Upon options expiry, LP’s unclaimed liquidity is automatically rolled over using identical terms. This way, liquidity providers do not need to relocate the capital to create new pools. This feature differs from other protocols, where option tokens have a rigid expiration and liquidity providers have to create new markets for every expiry of options. 

Capital Efficiency: Capital efficiency is a concern of many liquidity providers. Managing liquidity provision across multiple strikes and expiries can be capital intensive. Divergence deploys a system that helps liquidity providers to manage their capital efficiently. Liquidity providers can use LP tokens or borrowed capital from lending protocols to create binary options pools. 

Furthermore, the writing and buying of option tokens require no over-collateralization. This is because the predetermined payout of binary options buyers are reserved by the smart contracts. Because of this LPs would only need 1 collateral to write a binary call and a binary put. 

Looking Forward

Divergence has also made major developments within its ecosystem with the launch of the Divergence V1 Testnet. Traders can get a head start by trying out various innovative features on the platform. 

Divergence roadmap also has a lot of activities in store in Q4 2021. Following its IDO and token listings, Divergence plans to launch its mainnet after auditing completion. With the mainnet launch, traders will have access to decentralized options markets for a larger number of assets, more collateral choices and an upgraded interface. 

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 Disclaimer: This is a paid post and should not be treated as news/advice.