Psychic Whitepaper

What is Psychic

Friends, imagine when we trade stocks, we sometimes use a financial instrument called an “option.” It gives you the right, but not the obligation, to buy or sell an asset at a certain price in the future. In the blockchain world, there’s a similar need. Psychic, more precisely, refers here to the PsyOptions project, which acts as an “option factory” and trading platform on the blockchain.

Simply put, PsyOptions is a decentralized options protocol built on the Solana blockchain. Its core goal is to enable everyone to easily create, trade, and settle various digital asset options on the blockchain. You can think of it as a highly automated, transparent, and globally open options exchange, but it runs on the blockchain and is managed by code rather than traditional financial institutions.

Target Users and Core Scenarios:

• Options traders: Professional or non-professional investors who wish to hedge risks, speculate, or earn returns through options.
• Liquidity providers: Users who want to earn option premium income by providing assets.
• Developers: Other blockchain projects can leverage PsyOptions’ infrastructure to integrate options functionality into their own applications.

Typical Usage Flow:

Suppose you want to hedge against the price drop risk of a Solana ecosystem token (SPL Token) you hold. You can buy a put option on PsyOptions. This option will exist in the form of an SPL Token, and you can trade it on any decentralized exchange (DEX) that supports SPL Tokens. If the token price really drops at expiry, you can exercise the option to sell your tokens at a higher price, offsetting some of your losses.

Project Vision and Value Proposition

PsyOptions’ vision is to become the preferred on-chain financial services platform for global DeFi users. It aims to bring the mature options trading experience from traditional finance (TradFi) into the world of decentralized finance (DeFi).

Core Problems to Solve:

• High barriers in traditional options markets: Traditional options trading is often unfriendly to retail investors, with complex processes and reliance on centralized institutions.
• Limitations of on-chain options markets: Early on-chain options protocols may suffer from low capital efficiency, slow transaction speeds, and high fees.
• Lack of flexibility and composability: Many protocols strictly limit option pricing, asset types, and trading methods.

Differences from Similar Projects:

PsyOptions’ uniqueness lies in its “option factory” feature. It makes no assumptions about option pricing, assets, or trading methods, meaning anyone can create an options market for any SPL Token and customize parameters like strike price and expiry date. This openness and flexibility greatly lower the entry barrier to the derivatives market and allow other protocols to build on top of it.

Additionally, PsyOptions is built on the Solana blockchain, leveraging its fast block times and low transaction fees to make option trading execution speeds close to traditional exchanges, enhancing user experience.

Technical Features

PsyOptions’ core technical features lie in its implementation on the Solana blockchain and its unique handling of options contracts.

• Based on Solana blockchain: PsyOptions utilizes Solana’s high throughput and low latency to ensure options trades are settled quickly and efficiently. It’s like trading on a wide, high-speed highway, greatly reducing congestion and wait times.
• SPL Token standard: PsyOptions represents options as standard tokens (SPL Tokens) on Solana. This means these options can be freely traded like any other token on DEXs that support SPL Tokens, greatly enhancing their liquidity and composability. You can think of SPL Tokens as “universal building blocks” in the Solana ecosystem, and options are built with these blocks, allowing seamless integration with others.
• “Option factory” model: The protocol itself does not preset option prices, asset types, or trading methods. Anyone can create new options markets and customize the strike price, expiry date, and underlying asset. It’s like an open mold factory where you can manufacture options products of any specification, rather than only buying a few preset types.
• No external dependencies: PsyOptions V1 does not require external oracles to fetch price information when creating options. This makes the option creation process more decentralized and trustless. Oracles are like “external informants” in the blockchain world; PsyOptions does not rely on them for certain core functions, reducing potential single-point-of-failure risks.
• Collateral mechanism: PsyOptions V1 uses a fully collateralized approach, meaning option sellers must lock up the full underlying asset as collateral. While this somewhat reduces capital efficiency, it ensures trustless settlement. It’s like selling a lottery ticket and having to set aside the prize money in advance to guarantee the winner gets paid.
• From American to European options: PsyOptions initially offered American options (exercisable at any time before expiry) and plans to shift to a European options (exercisable only at expiry) architecture to improve capital efficiency.
• PsyFinance integration: Through the acquisition of Tap Finance and its rebranding to PsyFinance, PsyOptions integrated decentralized options vaults (DOVs), providing automated options strategies to help users earn returns.

Tokenomics

The token for the PsyOptions project is PSY, which mainly serves as a governance token.

• Token symbol/Issuing chain: PSY, issued on the Solana blockchain.
• Total supply: The maximum supply of PSY is 1,000,000,000 (1 billion) tokens.
• Token utility: The core utility of the PSY token is governance. Users holding PSY tokens can participate in protocol decisions, such as voting on smart contract upgrades, treasury management, and proposals for future protocol development. It’s like shareholders in a company voting on major decisions.
• Revenue distribution: The PsyOptions protocol earns revenue from minting and exercise fees, licensed Serum market trading volume, and affiliate fees from user interfaces integrated with the Serum order book. These fees are deposited into an address controlled by the governance protocol, and PSY token holders can decide on the allocation and use of these funds through proposals and voting.
• Allocation and unlocking information (partial):
  • Initial funding round: In October 2021, PsyOptions completed a $3.5 million seed round at a $70 million fully diluted valuation, selling 5% of the PSY token supply to strategic investors. These tokens have a 4-year lockup and a 1-year cliff, meaning they won’t unlock in the first year and will begin linear unlocking after one year.
  • DAO treasury: The majority of PSY tokens (60%) are allocated to the DAO treasury, with distribution and use determined by governance voting.
  • IEO (Initial Exchange Offering): PSY tokens were offered in IEOs on exchanges such as FTX and Gate, with participants and subsequent investors purchasing at $0.0012/PSY.
  • Incentives: A portion of tokens is used to incentivize participants and drive protocol usage.
• Inflation/Burn: The documentation does not explicitly mention inflation or burn mechanisms for the PSY token.
• Current and future circulation: As of January 2022, the circulating supply of PSY is about 62,000,000 tokens (6.2% of total). Most PSY tokens are locked for 4 years to ensure alignment of incentives among the team, investors, community, and governance participants.

Team, Governance, and Funding

Team:

The PsyOptions team won first place at the Solana x Serum DeFi Hackathon in March 2021, marking the project’s starting point. Team members were volunteers in the early days, later becoming full-time through funding and continuously recruiting world-class engineers. Through the acquisition of Tap Finance, PsyOptions also integrated the Tap Finance team, jointly committed to building decentralized financial products.

Governance mechanism:

PsyOptions adopts a decentralized autonomous organization (DAO) governance model. PSY is a pure governance token, and holders can manage smart contracts and the treasury through on-chain voting. Proposals are made on-chain and voted on with PSY tokens. This means PSY holders collectively have the power to upgrade the protocol and can create incentives to reward participation and drive protocol usage.

Funding:

PsyOptions completed a $3.5 million initial seed round in October 2021 at a $70 million valuation. Subsequent funding rounds followed, and the IEOs were successfully conducted on FTX and Gate. Protocol-generated fees (such as minting and exercise fees) are deposited into an address controlled by the governance protocol, with allocation decided by PSY holders through voting.

Roadmap

PsyOptions’ roadmap is mainly focused on 2022. Here are some key historical milestones and future plans:

Key historical milestones and events:

• March 2021: Won first place at the Solana x Serum DeFi Hackathon.
• August 22, 2021: Launched on Solana mainnet.
• October 19, 2021: Completed initial funding round.
• December 15, 2021: Tap Finance (later PsyFinance) launched on Solana mainnet.
• January 2022: Successfully conducted IEOs on FTX and Gate, oversubscribed by more than 20x.
• February 1, 2022: Acquired Tap Finance and rebranded it as PsyFinance to add structured investment products.

Important future plans and milestones (mainly focused on 2022):

• Q1 2022:
  • Launch PsyFinance v2: An improved decentralized options vault (DOV) protocol, leveraging PsyOptions’ upcoming tokenized European options architecture to improve capital efficiency and user returns.
  • Start liquidity mining program for PsyFinance v2.
  • Psy Markets v1 goes live on Devnet.
  • Launch a non-trading user interface options portfolio manager.
• Q2 2022:
  • Push Psy Markets v1 to mainnet: A European options protocol with portfolio margin, aimed at improving capital efficiency.
  • Expand PsyFinance DOV beyond short-term volatility strategies.
• Q3 and Q4 2022:
  • Plan to launch Psy Markets v2 on Solana mainnet, mainly adding futures trading functionality.
  • Aim to provide options and futures trading within the same margin system for a more comprehensive financial services platform.

Note that the above roadmap is mainly based on public information from early 2022. Blockchain project roadmaps may be adjusted according to market changes and development progress.

Common Risk Reminders

Investing in any blockchain project comes with risks, and PsyOptions is no exception. Here are some common risk reminders:

• Technical and security risks:
  • Smart contract vulnerabilities: Although the project team conducts audits, smart contracts may still have undiscovered vulnerabilities that could lead to loss of funds.
  • Solana network risks: As part of the Solana ecosystem, PsyOptions may also be affected by Solana network performance, stability, or security issues.
  • Protocol complexity: Options protocols are inherently complex, with high technical implementation difficulty and potential for unexpected errors.
• Economic risks:
  • Market volatility: The cryptocurrency market is highly volatile, and options trading itself is a high-risk financial activity that may result in loss of principal.
  • Liquidity risk: Although PsyOptions aims to improve liquidity, certain specific options markets or extreme market conditions may still suffer from insufficient liquidity, affecting trade execution.
  • Competitive risk: The on-chain options and derivatives space is highly competitive, and PsyOptions may face competitive pressure from other protocols.
  • Token price volatility: As a governance token, PSY’s price is affected by market supply and demand, project development, and overall crypto market sentiment, and may fluctuate significantly.
• Compliance and operational risks:
  • Regulatory uncertainty: Global regulatory policies for cryptocurrencies and DeFi remain unclear, and future policy changes may impact project operations.
  • Governance risk: Although DAOs aim for decentralization, if token distribution is too concentrated or community participation is insufficient, there may still be risks of low governance efficiency or control by a minority.
  • Team execution risk: Roadmap implementation depends on the team’s development and operational capabilities. Poor execution may result in failure to achieve goals on time.

Not investment advice: The above information is for project introduction only and does not constitute any investment advice. Before participating in any cryptocurrency project, please conduct thorough due diligence, understand the relevant risks, and make decisions according to your own risk tolerance.

Verification Checklist

To gain deeper insight into the PsyOptions project, you can refer to the following information:

• Block explorer contract address: Look up the PSY token contract address on Solana and the relevant smart contract addresses for the PsyOptions protocol to verify on-chain activity and token holdings.
• GitHub activity: Visit PsyOptions’ GitHub repository (e.g.,
  mithraiclabs/psyoptions
  ) to check code update frequency, number of contributors, and issue resolution to assess project development activity.
• Official website and documentation: Visit the PsyOptions official website and PsyFi documentation for the latest project information, technical details, and community guides.
• Community channels: Join the project’s Discord, Telegram, or Twitter communities to learn about community discussions, project announcements, and team interactions.
• Audit reports: Look for third-party security audit reports of the project’s smart contracts to assess their security.
• CoinMarketCap/CoinGecko: Check PSY token market data, trading volume, market cap, and historical price trends.

Project Summary

PsyOptions (PSY) is a decentralized options protocol built on the Solana blockchain, aiming to provide DeFi users with an open, flexible, and efficient on-chain options trading platform. By tokenizing options as SPL Tokens and adopting an “option factory” model, it allows users to freely create and trade various options products, lowering the barriers of traditional options markets. The PSY token serves as the governance core of the project, empowering holders to participate in protocol decisions, including smart contract upgrades and treasury management. The project team is active in the Solana ecosystem and continues to expand its product line through initiatives such as the acquisition of PsyFinance, striving to become a global DeFi financial services platform.

However, like all emerging blockchain projects, PsyOptions faces risks such as smart contract vulnerabilities, market volatility, regulatory uncertainty, and competition. Investors should fully understand these risks and conduct in-depth research before considering participation. Remember, the above content is for project introduction only and does not constitute any investment advice. For more details, please conduct your own research.