Premia is a platform for trading options in decentralized finance (DeFi) that operates on both the Ethereum and BNB Chain. It allows users to provide liquidity to, or buy and sell options from a liquidity pool. Additionally, it enables the trading of options, provides protection to users through hedging risk and allows users to earn a market yield on DeFi assets. ^[1]

Overview

Premia utilizes ERC-1155 for the securitization of covered options contracts where the token collateral is locked up with the smart contract until either expiration, exercise, or early cancellation.^[2]

The Premia Options Minter was constructed to be able to write Options for any Token Denominated in either DAI/WETH/WBTC. By using the ERC1155 Token Standard users can verify that each option minted is uniform to all other like options of its kind i.e. maintain the same expiration/strike price and can be exercised for a like amount of of the underlying asset as deemed within the specifications of the options contract.^[3]

uPremia is a non-transferable token that's sole purpose is used to mine the Premia emitted via Interaction Mining. uPremia is staked in the Mining contract and proportional to the amount staked, users are rewarded a fixed amount of Premia per block^[1]

Liquidity Pools

Premia's platform offers a call and a put pool for each available asset pair. The call pool is underwritten in the underlying asset, while the put pool is underwritten in DAI. This two-pool structure enables liquidity providers (LPs) to have control over the strategies they wish to underwrite. Unlike the traditional order-book model, where demand from buyers and sellers typically needs to match in terms of strike price, expiration date, and size, Premia's LPs are not limited by such requirements. As a result, buyers and sellers are not restricted in their options trading strategies. ^[5]

PREMIA Token

PREMIA is an ERC1155 token, which is a standard commonly utilized by creators of non-fungible tokens (NFTs) as digital collectibles or artwork. In the case of Premia, this token standard allows for the creation of various options through a single smart contract that is capable of minting and managing multiple unique tokens. ^[4]

The Premia Token is the governance token for Premia Finance, providing holders with governance rights over the protocol. In addition to governance rights, the token allows holders to earn passive income through xPremia staking. Rewards for stakers are generated from platform fees and are dependent on the overall profits generated by the platform. Staked Premia tokens entitle holders to receive a pro-rata share of protocol fees, with the proportion being directly proportional to the amount of Premia staked. The Premia Token can also be used to vote in favor of receiving protocol fees in Premia, thereby reducing the fees paid. ^[3][4]

Token Distribution

• Primary Bootstrap Contribution — 10% (10MM Premia Tokens)
• Interaction Mining - 30% (30MM Premia Tokens)
• Reserved for Premian Republic Development - 25% (25MM Premia Tokens)
• Bonding Curve - 25% (25MM Premia Tokens)
• Distributed to Founder Vested over 1 Year - 10% (10MM Premia Tokens)

Primary Bootstrap Contribution

The PBC or Primary Bootstrap Contribution is a method to participate in the future of Premia. Utility tokens are often used as the underlying fuel for accessing features of a dApp and are also a way to collect Premia to gain access to exclusive rights and features available at Launch.^[1]

Users contribute ETH to receive Premia Utility Tokens, all contributions are final. Upon the closure of the PBC (7 days), all tokens are split according to their pro-rata amount of ETH contributed. For example, if two users contribute ETH, User 1 contributes 75 ETH and User 2 Contributes 25 ETH, then User 1 will receive 75% (7.5mm Premia Tokens) and User 2 will receive 25% (2.5mm Premia Tokens) at the conclusion of the PBC period.^[3]

Premia V2

Premia V2 introduced Automated Market Makers (AMM), where sellers participate as liquidity providers (LPs) by depositing their cryptocurrencies such as WBTC, WETH, LINK, and DAI. Subsequently, option buyers have the ability to generate their own options from the pool of assets, which are made available by the LPs. ^[6]

The update also introduced new features such as DEX Swaps and Option Positions as NFTs, among other functions.

Liquidity Mining

Following the mainnet launch, call/put pools for WBTC, WETH, and LINK became operational on the Premia platform. Users have the opportunity to provide liquidity in these tokens, as well as in DAI, which can be used to underwrite the put pools. In doing so, users can generate yield by underwriting options on the platform. ^[6]

Smart Deposit

Premia's Smart Deposit feature enables users to optimize their pool deposits with minimal impact on pool price levels. This feature also allows users to participate in Premia's liquidity mining program automatically. Users can leverage Premia's on-demand market pricing system to earn higher yields on average. Additionally, the Smart Deposit interface allows users to swap any asset they have to the required asset for a pool without leaving the Premia platform. ^[6]

DEX Swaps

Users can execute DEX trades without the need of leaving the application, where users can swap assets into any pool or option that the platform offers. ^[6]

Premia V3

V3 whitepaper was published on January 13, 2023. There are five main features that are introduced:

Market Orders & Limit Orders

Users can buy or sell European-style calls and puts, select the expiration, strike price, and size, and receive various price quotes from liquidity pools, strategy vaults, and the RFQ network. Moreover, users can place limit orders to buy or sell options at their preferred price, which will be routed via the RFQ network. Instead of transactions, users need to sign a message to accept orders. ^[7]

Smart Concentrated Liquidity

Liquidity Providers (LPs) have the option to select a range of premiums within which their liquidity will be utilized. In addition, a feature has been implemented that automatically adjusts the concentrated liquidity range order as the price of an option moves in and out of the LP's chosen range. This results in decreased risk for LPs while generating higher yield from trading fees. ^[7]

Strategy Vaults

Automated strategy vaults provide an alternative for LPs who prefer not to actively manage their positions. Vault users can generate more stable and predictable yields compared to simply providing liquidity in a pool. The vaults can be tailored for various purposes, including Delta-hedging and lending margin capital. ^[7]

Margin Trading

Premia v3 traders have the ability to borrow assets against collateral, thereby leveraging their active positions. This feature allows users to sell options with lower initial capital requirements, which increases capital efficiency across the exchange. The margin amount available for trading in Premia v3 is based on a risk profile determined by the option traded and spot asset volatility. ^[7]

Permissionless Pool Creation

Premia v3 allows any LP to create an option pool with their desired parameters, including the underlying token, strike price, and expiration, as long as they have sufficient liquidity to bootstrap the pool. These pools may or may not be available on Premia's front-end app, depending on their liquidity and demand. Anyone can interact with them via their corresponding smart contract without requiring permission. ^[7]