After a successful testnet beta and trading competition, we are excited to announce that Lyra has successfully integrated Chainlink Price Feeds, the industry-leading decentralized price oracle solution. Chainlink-powered decentralized oracles provide high-quality price data with high availability, resistance to manipulation, and transparency—a key input into Lyra’s novel options risk management and pricing mechanism.Understanding Lyra
Lyra is a protocol for trading options on Ethereum. Designed natively for the Ethereum Layer 2 scaling solution Optimism, Lyra is the first protocol to manage risk for liquidity providers (LPs), allowing it to offer the best on-chain pricing for traders.
From the outset, Lyra has focused on bringing accurate options pricing to DeFi. Long have traders been exposed to high fees on trades, as a temporary and counterproductive means to offset the risk of the LPs. This creates a fundamental tension between traders and LPs, as high options prices means less risk for LPs but significantly dampens volume because traders are disincentivized to participate. On the other hand, lowering fees without native risk hedging results in inadequate compensation for LPs and exposes the pool to unacceptable blowup risk.
A logical next step is to find a better way to measure and manage liquidity pool risk. However, high gas and slow transaction time prohibits the use of industry acceptable risk metrics like the ‘options greeks’ and the computationally intensive Black Scholes Pricing model. Enter Layer 2 Ethereum — we built Lyra natively for Optimism to satisfy the computational requirements needed to achieve far more robust risk management and, in-turn, better pricing.
If Lyra is aiming for best-in-class options pricing, then external price feed inputs are of the utmost importance to get right. After researching potential oracle solutions, it became clear that Chainlink is by far the most widely used, trusted, ...