Feb 3 | 6 min read
Structured products are packaged financial instruments that use a combination of derivatives to achieve some specific risk-return objective, such as betting on volatility, enhancing yields or principal protection. Unlike in traditional finance, these products are out in the open, and verifiable by anyone.
Ribbon launched on Ethereum on Feb 15th, 2021, opening its one-click vaults for deposits. On May 25th, 2021, the RBN token was airdropped to the early supporters of the protocol, in an effort to decentralize governance to the Ribbon community. The token was initially non-transferable and only used in governance votes until it went live for trading on Uniswap v3 October 8th, 2021.
The tokenomics are currently in the process of being reworked, the team is looking to ship its new “Ribbonomics” in the beginning of this year. The new framework will aim to include vote-locking, vault fee sharing and the intertwining of incentives between RBN and the yield earned by vault depositors. Below you can see the steady growth of TVL and revenue as Ribbon continues to expand its structured products — keep in mind this TVL was established with zero token incentives.
Users are able to deposit digital assets into the Ribbon vaults which automatically use the funds for a covered call or covered put strategy and compounds the yield weekly. Once the vault receives the deposit, they use the collateral to mint options from Opyn and then sell them to a market maker to collect yield. As long as the options expire outside of the money the vault uses this yield for next week as its algorithm selects a new strike price and profits are compounded. Depending on the premiums in the market at the time of minting will determine the weekly yield, which is then annualized and displayed at the forefront of the vaults.
Ribbon Finance makes it very simple to participate in robust high-yield strategies developed and audited by a team of finance professionals. It simplifies these strategies into one-click deposit vaults, and provides a clear UX for users to also understand how their profits change depending on market conditions. Unlike the commonly known yield-farming strategies popularized by early DeFi bluechips, Ribbon’s vaults present an opportunity for yield that is not based chasing on token incentives
Currently, the most popular strategy are the Theta Vaults. The Theta Vault is a product that automates a covered call strategy to earn high yield on ETH. The vault runs a covered call strategy and sells out of the money call options on a weekly basis for yield. You can read more about the strategy here.
Ribbon Finance was founded by Julian Koh and Ken Chan, they both worked as software engineers at Coinbase prior to starting the Ribbon protocol. After noticing the unsustainability in many DeFi pools they sought to create a protocol that opened access to sustainable yields via structured products with simple UX ushering in a wide array of entrants. The current Ribbon team stands at 7 and aims to grow this year to support multi-chain efforts and grow its suite of structured products. The total supply of RBN tokens is currently 1,000,000,000 of which 51,300,822 are circulating at a market capitalization of $90.4 million USD. The team is currently working on shipping its revamped “ribbonomics” to include vote locking and fee-incentives to add utility to its governance token.
Ribbon has been lauded for pioneering the popularity of structured products on the Ethereum blockchain. Many have pointed out the difficulties of structured products on-chain because of high gas costs and low liquidity. However, Ribbon has solved these issues with their incredible focus on user experience with one-click vaults, users only need to spend gas once to gain exposure. By creating Vaults for both sides of a strategy, they have bootstrapped an incredible rise in Option liquidity in the DeFi space.
Prior to Ribbon, options in DeFi had little to no adoption, poor liquidity and expensive execution prices. After the creation of DeFi Option Vaults (DOVs), the community and market makers took notice as liquidity within the space ballooned and competitors arose. Due to the nature of these vaults, depositors cannot earn yields without having a counter-party purchasing the options that are minted from Opyn. Being the first mover in the DOV space, with a fully audited protocol and doxxed team has allowed Ribbon to build a repertoire of market makers to consistently bid for these contracts and provide optimal returns for depositors.
Capital composition of Ribbon Vaults
As explained earlier, Ribbon has been the pioneer for bringing structured products to DeFi as well as enabling it for the masses. An index focused on DeFi innovation would not be complete if it was not included. Ribbon represents a chance at taking a piece of the massive 7 trillion TradFi structured products market. The protocol is also uniquely positioned to generate sustainable yield in multiple different market conditions — which might come in handy as we move into a year filled with uncertainty.
Upcoming launches include treasury vaults for DAOs and multi-chain deployment. Vaults for DAO’s treasuries will aim to make use of stagnant assets by employing low risk option strategies in Ribbon vaults. The aim of this launch is to create a symbiotic relationship between Ribbon and DAO’s in which the protocol continues to increase TVL while helping expand treasury assets in a sustainable strategy. Ribbon recently deployed on the Avalanche blockchain as it begins to march its way into becoming the flagship structured product protocol on every chain. So far, the team has announced on deploying Ribbon onto Solana, Luna and Near in the upcoming year.
In addition to this, Ribbon will be launching “Meta vaults”. The idea is simple: build on top of the base covered call and put selling vaults and get a cut of the management and performance fees of the base vaults. You can find more about the Meta Vaults in a post written by Chuddy here.
The Bankless DeFi Innovation Index (GMI) is designed to capture the performance of the most significant tokens in the Decentralized Finance ecosystem. The Bankless DeFi Innovation Index (GMI) utilizes an indexing strategy to offer broad, diversified exposure in a single token. GMI allows users to de-risk their exposure to DeFi upstarts–which are often novel and risky, yet contain considerable upside.
GMI currently has a Market Capitalization of $2.4 million. From Jan. 10th, 2022 — Mar. 10th, 2022 you can stake GMI on the IndexCoop platform and earn INDEX. Currently returning 102.48% APR.
Index Coop is a decentralized autonomous organization (DAO) that powers structured decentralized finance (DeFi) products and strategy tokens using smart contracts on the blockchain. We offer a suite of sector structured products, leverage and inverse products, and yield-generating products. We aim to create products that are simple to use, accessible to everyone and secure. Our products are built on Set Protocol, a twice-audited, self-custodial DeFi tool that allows for the creation and management of Ethereum-based (or ERC-20) tokens. Among users, partner protocols, and our composable products, Index Coop maintains one of the largest partnership networks in the DeFi ecosystem.
First, you’ll need to create an Ethereum wallet like Argent, Metamask, Gemini, or Rainbow.
Next, you’ll set up your new wallet and connect your bank account.
You can also earn or buy MKR tokens directly via your favorite decentralized exchange.
Disclaimer: This content is for informational purposes only and is not legal, tax, investment, financial, or other advice. You should not take, or refrain from taking, any action based on any information contained herein, or any other information that we make available at any time, including blog posts, data, articles, links to third-party content, discord content, news feeds, tutorials, tweets, and videos. Before you make any financial, legal, technical, or other decisions, you should seek independent professional advice from a licensed and qualified individual in the area for which such advice would be appropriate. This information is not intended to be comprehensive or address all aspects of Index or its products. There is additional documentation on Index’s website about the functioning of Index Coop, and its ecosystem and community.
You shall not purchase or otherwise acquire any of our token products if you are: a citizen, resident (tax or otherwise), green card holder, incorporated in, owned or controlled by a person or entity in, located in, or have a registered office or principal place of business in the U.S. (a “U.S. Person”), or if you are a person in any jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorized (together with U.S. Person, a “Restricted Person”). The term “Restricted Person” includes, but is not limited to, any natural person residing in, or any firm, company, partnership, trust, corporation, entity, government, state or agency of a state, or any other incorporated or unincorporated body or association, association or partnership (whether or not having separate legal personality) that is established and/or lawfully existing under the laws of, a jurisdiction in which such offer, sale, and/or purchase of any of our token products is unlawful, prohibited, or unauthorized). You shall not resell or otherwise transfer any of our token products to any Restricted Person. The transfer or resale of any of our token products to any Restricted Person is not permitted. Click here to view the list of Tokens Restricted for Restricted Persons. You shall read the Terms of Service and use our Website in compliance with the Terms of Service.
Information is for educational and illustrative purposes only. The Index Cooperative is not engaged in the business of the offer, sale or trading of securities and does not provide legal, tax, or investment advice. Cryptocurrencies and other digital assets are speculative and involve a substantial degree of risk, including the risk of complete loss. There can be no assurance that any cryptocurrency, token, coin, or other crypto asset will be viable, liquid, or solvent.No Index Cooperative communication is intended to imply that any digital assets are low-risk or risk-free. The Index Cooperative works hard to provide accurate information on this website, but cannot guarantee all content is correct, complete, or updated.