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zkVault introduces dedicated vaults for each of its products, implemented as smart contracts with the primary functions of securely holding collateral and facilitating options contract creation. These vaults are uniquely identified by their collateral asset (e.g., wETH, wBTC, DAI) and delta, distinguishing between bullish and bearish positions. In addition to the vaults, zkVault incorporates three essential design components:
- Queues serve as liquidity buffers, efficiently managing user funds until they are ready to be deposited into the corresponding vault.
- Pricers play a crucial role in determining the strike price for options and establishing auction pricing parameters, ensuring fair and accurate pricing mechanisms within the zkVault ecosystem.
zkVault revolutionizes liquidity provision by offering a departure from the traditional "short volatility" position enforced on many other platforms, where LPs are required to underwrite both calls and puts simultaneously. In contrast, zkVault introduces asset and direction-specific option pools, allowing LPs to tailor their strategies to their desired exposure.
The zkVault option pools unlock a plethora of possibilities for LPs, enabling the implementation of various advanced strategies, including optimizing for zkVault token farming, capital deployment based on momentum shifts within pools, delta-hedging, and other hedging techniques involving greeks or spreads. Additionally, zkVault supports shorting volatility for specific assets and exploring options arbitrage opportunities across different platforms, among many other strategies.