Thetanuts Finance

Thetanuts Finance is a decentralized, on-chain options protocol that operates across multiple blockchains. Launched in August 2021 by a team of programmers, hedge fund managers, and financial analysts, the company aims to simplify access to DeFi structured products. The firm has secured significant funding, including an $18 million seed round in March 2022 and a $17 million round in April 2023, from investors such as Polychain Capital, Three Arrows Capital, HyperChain Capital, and Jump Crypto. These funds are allocated to developing its structured products platform and expanding its user-friendly instruments within the crypto derivatives market.

The core of Thetanuts Finance's business is providing structured financial products that enable users to generate yield on their crypto assets. It primarily serves retail traders and Decentralized Autonomous Organizations (DAOs) seeking treasury management solutions. The protocol specializes in altcoin options, addressing a gap in the market, as most option protocols focus on major assets like Bitcoin and Ether. This focus on altcoins is strategic, capitalizing on their higher volatility and the need for yield generation mechanisms where none might otherwise exist.

The platform's architecture, particularly with its v3 upgrade, integrates several key components: Basic Vaults, an Automated Market Maker (AMM), and a Lending Market. Users can deposit assets into Basic Vaults, which then sell out-of-the-money (OTM), European-style, cash-settled options to generate yield from premiums. The AMM, which utilizes Uniswap v3 pools, provides liquidity and facilitates the trading of these options, allowing users to take both long and short positions. The Lending Market, inspired by Aave v2, offers an additional layer for yield generation, where users can lend their Basic Vault LP tokens to earn interest or borrow against them for leveraged positions. Revenue for the protocol is generated through option premiums, interest from lending, and trading fees from the AMM.

Initially focused on sell-side strategies through its vaults, the platform has evolved to support buy-side participation, making it a more comprehensive options protocol. It operates on numerous blockchains, including Ethereum, Arbitrum, Polygon, and Avalanche, enhancing its accessibility. Looking forward, Thetanuts Finance plans to introduce its v4 architecture, which will transition from an AMM to a Request-for-Quote (RFQ) model. This is intended to attract deeper liquidity from professional market makers and institutional participants by allowing for direct price quoting, leading to more competitive pricing and tighter spreads.

Keywords: decentralized finance, DeFi, options protocol, altcoin options, structured products, on-chain options, yield generation, automated market maker, AMM, crypto derivatives, multi-chain, treasury management, liquidity pools, Uniswap v3, European options, DeFi lending, crypto yield, blockchain finance, financial protocol, NUTS token, options trading, digital assets, volatility trading, risk management, crypto structured products