Can Ribbon Finance be reborn from structured option products to on-chain derivatives exchanges?

Can Ribbon Finance move from structured options to on-chain derivatives?

Ribbon is transitioning its core products from structured option products to the newly launched Aevo decentralized derivatives exchange. Blockworks Research analyst Brrr has written an analysis of the current state of on-chain options and Aevo’s competitive advantages. With the launch of Aevo, can Ribbon change the status quo and bring new developments to on-chain options?

Ribbon is known as a leader in the on-chain options market, but since Q4 2022, the protocol has lost market share. The problem with institutional options products is that they do not particularly cater to any customer group. On the one hand, highly automated systems are too restrictive for traders who require complex operations, and on the other hand, users seeking pre-set strategies may suffer from gradually decreasing DOVs or underperformance when using capital protection pools. Therefore, Ribbon has launched Aevo, an on-chain derivatives exchange that offers options and preps.

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Aevo’s main on-chain competitors all use the options AMM model, which generally has structural problems, such as low pricing efficiency, low capital efficiency, and difficulty attracting liquidity. Therefore, in the long run, they cannot compete with the user experience provided by Aevo. Additionally, due to low liquidity, high latency, throughput issues, and other on-chain design limitations, the options protocol has been unable to challenge centralized entities. Therefore, Aevo may gain tremendous growth by attracting even a small portion of CEX users. Furthermore, Aevo may introduce its own token, which, if it happens, may accumulate fees instead of veRBN.

Reference: https://twitter.com/blockworksres/status/1674480525296439296

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