Option pools allow users to earn a yield passively by providing base asset and quote asset liquidity for users who'd like to buy call and put options respectively.
In traditional finance and existing CeFi option providers such as Deribit, users looking to sell volatility have to decide which strikes and expiries they'd like to provide liquidity for while constantly scanning orderbooks for buy side liquidity. This can be a tedious and slow process manually and needing constant monitoring and parameter updates incase of it being done in an automated manner. Dopex makes use of option pools allowing anyone to earn a yield passively by selling options to purchasers with minimal interaction with the protocol. Pool participants can simply deposit base or quote assets to a pool which would be utilized as liquidity to users looking to purchase call and put options. At the end of every epoch (weekly or monthly), pool participants would be able to collect their share of pool holdings including premiums paid for all options relative to the size of the pool as well as DPX token rewards at the initial stages as an incentive for providing liquidity.
In-case of losses incurred by the pool when purchasers make a net profit on their option purchases, pool participants would receive rebate tokens - rDPX - which would be minted equivalent to 30% of all losses incurred by the pool. This would make providing liquidity to dopex a better alternative to vanilla options writing on other platforms.
Rebate tokens would be required for usage across the protocol including initial token distribution via yield farming, generating synths, fee payments etc. giving it intrinsic value for long term sustainability.
Option pool may be either weekly or monthly pools - with varying levels of token incentives for liquidity provision considering the longer wait times to epoch expiries for monthly pools.
Volume pools are created for the purpose of boosting volume within the protocol by offering a 5% discount on all option purchases made using volume pool funds.
Incentivizing users to provide liquidity would make for a liquidity rich protocol - however without any genuine usage, this would lead to a chicken and egg problem in terms of generating actual usage of the protocol. To incentivize option market professionals to utilize the protocol and actually purchase options, Dopex makes of volume pools.
Volume pools allow users to deposit funds prior to weekly global epochs and use funds from the pool to purchase options from any option pool at a 5% discount. Volume pools create an arbitrage opportunity for sophisticated option traders purchase options at a discount and immediately arb them against other exchanges for a quick profit.
Volume pool depositors are also given DPX token rewards at the initial phases to further incentivize pool usage. At the end of every epoch, users can withdraw any excess funds from the volume pool - however they would have to pay a 1% penalty at withdrawal for non-usage of funds. All penalties are withdraw-able by DPX governance token holders in the form of protocol fees.