Options Protocol Brings 'Insurance' to DeFi Deposits on Compound

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At least on the Compound protocol, the collateralized lending platform that runs on ethereum.

The new product, from a company called Opyn, allows people to take out options on stablecoin deposits, allowing users to hedge against the risk of a catastrophic event wiping out Compound's books.

Compound is the third-largest DeFi app on ethereum, as measured by DeFi Pulse.

Compound has been stable since launching in late 2018, but no one disagrees that this world of DeFi is still tiny and hasn't really been tested in the fires of true panic.

On risk, Koticha says he's talked to a lot of people in the space about their fears of depositing on Compound.

Opyn's first product will offer a hedge, what financial types call a "Put option," which will guarantee that users can recover most of their lost capital if Compound has a disaster.

For now, it's simply making put options to protect Compound users.

If someone makes a deposit onto Compound of, say, 100 DAI, he gets cDAI tokens back.

He'll then feel safe for the next year knowing he can get most of his deposit back if something terrible happened to Compound.

Imagine a trader who foresaw a liquidity run on Compound.