Ribbon Finance - A Structured Product that Average User can Use
- Ribbon Finance is an options-based structured wealth management product protocol built on the Ethereum network, which was launched in February 2021.
- Users only need to deposit assets into Ribbon Finance, then the protocol will mint and sell options with lower exercise probability through the decentralized options trading platform on Ethereum to earn premiums and create revenue for users.
- Ribbon Finance launched the V2 version in Sept 2021, making improvements to the problems and defects in the V1 version.
- Ribbon currently provides users with four different types of structured products, with the highest annual return rate of 53.7%.
- Ribbon Finance's native token RBN has been launched for trading on the secondary market on Oct 7, 2021, and the current circulating supply is about 4.8% of the total.
- The distribution and vesting plan of RBN tokens has not yet been fully announced and is currently mainly used for decentralized governance.
Ribbon Finance is an options-based structured wealth management product protocol. Ribbon uses the assets deposited by users as collateral, mints options contracts with low exercise probability through the decentralized options trading platform on Ethereum, and sells them to specific buyers (such as V1 version market makers, V2 version bidders participating in options contract bidding, etc.) to earn premiums as users' profits. Currently, Ribbon has included two parallel running versions of V1 and V2, providing users with four different types of structured products based on USDC, ETH and WBTC, and the annual return rates range from 30.96%-53.7% (Oct 9, 2021).
After the users deposit their assets, all the user's funds are regarded as a unified position. Ribbon uses 90% of the unified position funds as collateral to cast an ERC-20 standard options contract token (known as O-Token) in Opyn, a decentralized options trading platform on Ethereum.
The strike price, expiration date and other relevant parameters of the options contracts are set by Ribbon team members. The options contracts are minted every Friday and expire one week later. The options contract strike price is usually far away from the current price to ensure that the options exercise probability is low (usually less than 10%), thus obtaining stable premiums for users.
Ribbon V1 specifies a series of whitelist market makers to reduce the risk of options sales. The Ribbon team will determine the options contract price under the chain with the market maker and sell the contract token on the chain.
The remaining 10% of the funds in the unified position are used to meet the withdrawal demand, and Ribbon charges users a 1% withdrawal fee. Users can initiate cash withdrawal at any time until the withdrawal reserve of 10% of the unified position is insufficient to meet the withdrawal demand, and the withdrawal function will be temporarily closed.
Ribbon Finance launched the V2 version in Sept 2021, improving the V1 version for its high degree of centralization, high withdrawal fees, and single strategy.
Decentralized solution: In the V2 version, options contracts are minted by smart contracts instead of Ribbon team members setting parameters. In addition, the minted options contracts will be publicly auctioned through Gnosis Auction. Compared with V1, where the buyer only includes white-list market makers, the options contracts in the V2 version support anyone to buy.
Cancellation of withdrawal fee: Ribbon V2 cancels the withdrawal fee, but the user cannot withdraw cash at any time, and can only withdraw cash after the options expired. Instead of a withdrawal fee, Ribbon will charge 20% of its weekly earnings as an administrative fee.
More revenue strategies: In the V1 version, users can only choose one product at a time based on a single strategy, and all policies are based on Opyn implementation. In the future, Ribbon plans to integrate the original products to make composite strategy products for users to choose from and expand the decentralized trading platforms supported by Ribbon's products, such as Hegic, Lemma Finance, 88mph, etc.
- Total supply: 1,000,000,000 RBN (1 billion)
- Purpose: On Nov 18 2021, Ribbon Finance announced its latest token economic model. According to the plan, users can use their own $RBN as collateral to get the $sRBN to obtain more on-chain governance rights and voting rights, as well as benefits such as $RBN reward boosting. In exchange, in the event of a black swan event or smart contract exploits, the users who stake $RBN will act as the insurer to pay a portion of the loss for the depositors. The new $sRBN token will be released in Q4 2021, while permission-free vaults and liquidity mining activities for stakers will be launched in the next few months.
- Distribution: The complete token distribution plan has not been announced, but only the airdrop and liquidity rewarding distribution plan has been clearly announced, accounting for 4% of the total supply.
In the airdrop segment, 2.1% of the total supply was allocated to early Ribbon users, 0.5% to active Discord members, and 0.4% to users of other Ethereum options protocols: Hegic, Opyn, Charm, Primitive.
The liquidity rewards are allocated to users who provide liquidity to the Ribbon Vaults between Jun 18 and Jul 19.
Other distribution plans are estimated based on the information given by EtherScan and CoinGecko as follows.
The current circulating supply of RBN is about 4.8% of the total, up to 5% before further token unlock distribution plans are announced.
- RBN can currently be traded on Coinbase, UniSwap, MEXC, and Gate. Coinbase accounting for 43% of daily trading volume, UniSwap v2 for about 20%, and UniSwap v3 for about 28%.
- At a price of $3.25 per token, the circulating market cap of RBN is approximately $156.8m, and the fully diluted market cap exceeds $3.2b.
Token Information: Ribbon Finance (RBN)