What Is Premia Finance?
Premia Finance is a decentralized options automated market maker (AMM) operating on the Ethereum, Arbitrum, and Fantom blockchains.
Background
Premia launched in early 2021 with a p2p orderbook options exchange.
How It Works
Premia differentiates itself from other decentralized options protocols through its unique offering of American-style options, which allow users to exercise their options before the expiry date, locking in profits early. This introduces an additional layer of risk to option sellers or liquidity providers (LPs), a risk not accounted for in the traditional Black Scholes pricing model. Premia introduces a unique ‘C-Value’ to the Black Scholes model to address this, creating market-driven option prices that adequately reward LPs for their additional risk.
PREMIA is the governance token of Premia Finance. The protocol is preparing to upgrade its legacy tokenomics to a vePREMIA model. This model requires users to lock their tokens into vePREMIA to participate in governance decisions, vote for liquidity mining allocations, earn protocol fees, and receive protocol fee discounts when using the platform.
Key Takeaways
- Premia Finance is a decentralized options automated market maker (AMM) available on Ethereum, Arbitrum, and Fantom blockchains.
- The platform was launched in early 2021 with a peer-to-peer exchange of orderbook options.
- It stands out from other decentralized options protocols by offering American-style options, enabling users to exercise their options before expiration.
- Premia adds a unique ‘C-Value’ to the traditional Black Scholes pricing model to account for the additional risk to option sellers or liquidity providers.
- PREMIA, the governance token of Premia Finance, is preparing to upgrade to a vePREMIA model, which will require users to lock their tokens to participate in governance decisions, vote for liquidity mining allocations, earn protocol fees, and receive protocol fee discounts.
