Decentralized liquidity solution for the decentralized options market
Charm Finance is a decentralized liquidity solution for supplying liquidity for decentralized options. In other words, Charm Finance is a decentralized options protocol that uses a radically different mechanism to create on-chain liquidity for traders, investors, and any stakeholders who want to participate in the decentralized option markets. The project claims that its solution is the most efficient way to create liquidity, at very low fees and a very competitive price.
According to its Medium post, Charm used a simple but profound mathematical property usually found in prediction markets and applied it to options. This solution was claimed to allow liquidity creation for any option markets in a way that Charm’s Automatic Market Marker is self-sustainable without any additional liquidity providers. Compared to other platforms, Charm has several differences. First of all, Charm does not rely on option writers to create options, and it means Charm’s can offers an unlimited supply of options to supply the market. The next difference is that Charm does not use pricing formulas to quote option prices, but rather entirely driven by supply and demand on the platform. Last but not least, it does not rely on liquidity pools in order to work properly.
At the time of writing the project is still in its beta stage (mainnet launched on the 14th of January 2021) and will start with the ETH options market at the beginning. The protocol has been audited to make sure there are no visible bugs but users must be careful and realize that an audit doesn’t necessarily guarantee immunity to hacking. The project also decided to roll out the markets gradually while gathering feedback and improvement since the options market is highly risky. Users are encouraged to learn about the options market and make sure they understand the risk of trading on the market as well.