Options Liquidity Mining (OLM)

Premia Blue replaces the traditional emissions-based liquidity mining model with Options Liquidity Mining.

In OLM, liquidity providers are rewarded with PREMIA Call Options at a 45% discount to the underlying asset’s market price at the time of claiming. Unlike other options on Premia, these options are physically settled using USDCe.

90% of the proceeds from OLM are directed to vxPREMIA holders, creating a uniquely positive-sum liquidity mining schema between stakeholders and liquidity providers. The remaining 10% is directed to The Parliament (DAO) as specified in the Fee Schedule.

1. Liquidity providers accumulate PREMIA Call Options that can be claimed at any time.
2. Upon claiming, the strike price for these options is set to 55% of the current market price (calculated daily at 8AM UTC). For example, if the price of PREMIA were $1.00, the strike price would be set to $0.55.
3. The PREMIA Call Options will be exercisable for 30 days after claiming. Users are required to pay the strike to exercise these options during this 30-day maturity period (option size*strike price). For example, if there are 100 PREMIA Call Options with a strike price of $0.55, the cost to exercise would be $55.
4. Upon exercise, 90% of proceeds circulate to vxPREMIA holders, while the remaining 10% is directed to The Parliament (DAO).
5. At maturity, users will have the ability to settle their options to receive their PREMIA tokens (assuming they've exercised the options during the 30-day period).
6. A protocol fee of 0.3% on the notional value is collected on exercise.

It is important to note that any USDCe deposited to exercise a position is not locked. If a user opts to withdraw their deposited collateral before maturity (effectively canceling exercise), they will receive (initial deposit - protocol fees). Users may opt to exercise only a portion of their position if they so choose.

Here is what happens if the user opts not to exercise their position during the 30-day maturity period:

1. The options will instead be locked for a one-year period.
2. After conclusion of the one-year period, 25% of the options’ intrinsic value will be directly credited to the liquidity provider’s wallet free of cost. E.g. if the options could have been exercised for $100 at expiration, the liquidity provider would only earn $25 worth

The OLM mechanism is entirely modular, allowing any ERC-20 market with a valid price oracle to be deployed as a physically settled option. If you are a protocol interested in migrating your liquidity mining emissions model to OLM, please get in touch with us at [email protected].