2022 was a rough start for crypto. The entire crypto market tanked and was down 11% in the first week of 2022.
What is astonishing is that DeFI option significantly outperformed the market by a large margin. This can be attributed to the strong growth rate of option protocol and relatively low price to sales ratio compared to other DeFi protocols.
The crypto derivatives trading make up roughly about 57% of the total monthly volume. Despite the high volume, the derivatives infrastructure is still in the infancy stage compared to the more established traditional financial market.
We strongly believe that there will be a breakthrough in crypto derivatives trading in 2022 with the rise of relevant key infrastructure.
DeFi is growing at an unprecedented rate, and a new project pops up nearly every day. The issue is that it is very time-consuming for users to screen new projects and construct a portfolio to chase yield.
Friktion prides itself to be an all-in-one portfolio manager that makes crypto-asset management easy. With a click of a button, the volt would automatically employ different strategies to help the user maximize return while managing risks.
Here’s a look at the new Automated Portfolio Manager (APM), Friktion finance and how it would help drive growth for crypto derivatives.
Solana’s first structured product protocol
Volts are the fundamental building blocks of Friktion. The volts are designed to make it easy for just about anyone to participate in yield generation. Each individual volt is specially crafted with its own cutting-edge yield strategies that help to generate sustainable yield.
There are four different volts each with its own objective:
- Income generation
- Sustainable stable
- Volatiltiy yield
- Hedge impermanent loss
The first volt which is also the main volt focuses on income generation through covered calls. It is a common strategy used by many DeFi vaults to earn sustainable yields.
Unlike traditional yield farming protocol that relies on token emission for yield, Friktion’s yield is derived from the option premium. It is more sustainable in the long run as the yield does not rely on token price.
When an investor buys an option, they have to pay a fee for the options contract and the fee is known as the option premium. The option premium makes up the base yield of the option vault and is sourced from large external options market.
Currently, it supports 11 different assets for its covered calls strategy from the traditional blue-chip, $ETH to the hottest Layer 1 of 2021, $LUNA.
According to Defi Llama, Friktion is currently Solana’s largest structured product protocol with over US$ 115 million in TVL. On average, it is growing at a rate of US$3 million TVL every day.
It wouldn’t take long before Frktion becomes DeFi largest structured product protocol.
Sustainable money lego yield
The beauty of DeFi composability is that it enables different DeFi protocols to stack together like a lego set. This process creates a new financial product with incredible yield returns.
Users can stake $SOL on the Marinade platform to earn an APY of 6.19%. In return for staking $SOL, user will get $mSOL as liquidity.
If you think 6.19% APY yield is too low and want to generate more yield, here is where Friktion comes into play. You can stake your $mSOL into the $mSOL covered call volt for an APY of 41.4%.
What this means is that you can stack Marinade APY of 6.19% on top of the volt covered call APY of 41.4%. This level of capital efficiency is unthinkable in traditional finance.
For instance, if you stake 100 SOL on Marinade at 6.19%, ceteris paribus, you will yield 6.19 SOL after a year. But if you take the mSOL and stake it on Friktion at 41.4%, you will instead yield a total net profit of 47.59 SOL.
Top-tier VC investors
Friktion is backed by some of the biggest and most established firms in the crypto space. Recently it made headlines for raising US$5.5 million
The backers include industry-leading derivatives trader and market maker, QCP Capital and leading crypto research firm, Delphi Ventures.
Moving forward, the next phase of Friktion growth will be the release of volts 3 & 4 which will see the support of new yield strategies. It will also add support of new assets into the mix and broaden its DeFi offerings.
How to start yield farming?
To kick start your journey into the world of Friktion, you first would have to connect your trust wallet. Currently, Friktion only supports 4 different trust wallets: Ledger, Phantom, Solflare and Sollet.
At the time of writing, users will only have a choice between Volt #01 or Volt #02. Volt #03 and #04 is yet to be released. For this example, I chose the covered call option for $SOL in Volt #01.
Some important information to note is the last traded option call price, the date and the fees. Enter the amount of $SOL you want to stake in the vault. After you click deposit $SOL, your trust wallet would prompt you to accept the transaction.
Once the transaction is approved, you just have to sit back and let Friktion work its magic. Happy farming!
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Solana News