Any products built in the decentralized finance ecosystem are susceptible to risks from the protocols they are built on top of. This includes both hack risk and systemic financial risk in the case of black swan events like runs on money markets, stablecoins losing their peg etc. These risks have the potential to collapse this entire ecosystem currently worth ~$600M.
Lots of users expressed fear that black swan risks caused a DeFi crisis (https://twitter.com/VitalikButerin/status/1164935614246072320?s=20)
How it works
This paper explains how the protocol works https://github.com/aparnakr/OptionsProtocol/blob/master/Options_Protocol-2.pdf
Delta is an insurance marketplace. Insurance providers earn premiums on their collateral and insurance buyers pay upfront for the right to protect their DeFi assets. In the case of a crisis, the insurance buyer can give up their claims on Compound / Maker in exchange for the collateral that the Insurance providers have locked up in our smart contracts.
What it does
The options protocol serves as insurance against DeFi hacks and risks, specifically against Dai collapsing and Compound collapsing.
How we built it
We built smart contracts on the Ethereum blockchain to represent the protocol. We drew inspiration from Maker, Compound and Yield designs to design our insurance protocol. We built an insurance protocol that uses put options.
On the front end, we used Figma to test out our designs and then built a React app.
Challenges we ran into
We ran into challenges testing the smart contracts. There are multiple test-nets with fragmented liquidity which makes it difficult to test a protocol that has dependencies on other protocols. We required Maker and Compound Oracles and Uniswap exchanges to test our code.
Accomplishments that we're proud of
We designed a financially complex options protocol on top of the Ethereum blockchain in the span of the hackathon. We also built the test-net version of the protocol and the react app that end users can use.
What we learned
We learned how to test smart contracts, Smart contract best practices, how to design complex DeFi protocols, how to work with webhooks, building scalable react app, A lot of finance.
What's next for Delta Protocol
We are actively working on launching this to the Ethereum mainnet once we have tested and audited the code! :)