New tokenized Dai options look to mitigate risk
A brand new DeFi product, ohmydai, permits customers to create put options on DAI, the place one celebration locks up USDC so as to mint ohtokens which then business on Uniswap. The ohtoken represents the suitable to promote 1 Dai for 1 USDC. Purchasers of the ohtoken are making a bet towards the cost of Dai as a result of if it drops they may be able to alternate it at any time (often referred to as an American choice) with the corresponding quantity of Dai for USDC. Those who create the put choice are making a bet the fee gained’t drop considerably and are paid a top rate for taking in this risk.
Why it issues:
As we highlighted in our contemporary Messari Pro file, the expansion of Dai has the possible to constitute an existential risk to Open Finance. For the ones with Dai publicity, monetary tools reminiscent of ohmydai permit them to hedge towards this sort of risk.
There could also be a problem to options like this as it may well create perverse incentives. By growing huge benefit doable if Dai drops, an actor may purchase a big sum of ohtokens after which manipulate the underlying collateral or spot Dai markets to crash the fee.