Ribbon Finance On Solana - SOL Theta Vaults

In this dashboard, we analyze the SOL vault (T-SOL-C) of Ribbon Finance to learn more about the success and popularity of the vault on Solana since its inception on Feb and, most importantly, to see how this vault has performed during the days of Solana's historic decline.

Ribbon Finance is a decentralized protocol for creating crypto structured products, i.e. prepackaged and cross-protocol DeFi investment strategies.

The project’s declared mission is to create “sustainable alpha for everyone.”

Depositors to Ribbon’s Theta Vaults get to abstract the difficulty out of participating in advanced, custom-tailored DeFi yield opportunities. Two transactions and voila, you’re in and earning automated returns in complex DeFi strategies. The Vaults also reinvest earnings back into their respective strategies, meaning depositors earn compounding returns!

Out of the gate, Ribbon’s Theta Vaults currently generate yields through two distinct option selling strategies, covered calls and put sellingin addition to ETH

On Feb 17, 2022 the Ribbon Finance added SOL Theta Vault to it’s main app :

> Today, we are super excited to announce that Ribbon is finally launching on Solana, partnering with Zeta Markets — the leading options project on Solana. > > To start, we are launching a covered call vault for SOL — a way for users to generate high-yield on their SOL. This is now open to deposits at Ribbon’s’ website. > > Ribbon users can now switch between EVM and non-EVM networks with ease, through a brand new network switcher interface. Ribbon’s new interface also now supports both EVM-based wallets like Metamask or Wallet Connect, as well as Solana-based wallets like Phantom and Solflare. > > - source -

In this dashboard, we analyze this vault (T-SOL-C) on Solana to learn more about the success and popularity of the vault on Solana since its integration with Ribbon Finance and, most importantly, to see how this vault has performed during the days of Solana's historic decline.

Theta vaults

Theta Vault runs are vaults that run an automated options selling strategy, which earns yield on a weekly basis through writing out of the money options and collecting the premiums.

What are Theta Vaults?

Theta Vaults use the Vault terminology because it stems from the idea of depositing your assets into a vault and earning a yield on them, set-and-forget.

Users can simply deposit their assets into a smart contract and will automatically start running a specific options strategy. This alleviates a majority of the gas problems by socializing the gas costs across all the vault depositors. Instead of doing 3–4 transactions per week per user, the vault will do 3–4 transactions per week for thousands of users at once. This makes the user experience of using these Theta Vaults extremely straightforward and relatively cheap — deposit, wait for yields, and withdraw.

What is a Covered Call strategy?

The covered call strategy is a unique options strategy where you earn yield for selling potential upside of an asset. For example, if you are willing to give up potential upside of ETH going above $25k by the end of the year, you can get paid 2% in yield for selling a $25k call option. This is over 10x the yield you can earn by supplying ETH on Compound.

In the unlikely case that ETH goes to $30k, you would have given up $5k, but you are still tremendously up in USD terms — it is a win-win scenario for you because you only risk getting exercised when ETH absolutely moons.

> Theta Vaults in its present design relies on Opyn oTokens. oTokens are ERC20 token representations of an options contract, where each of them have a strike price and expiry. Owning oTokens is functionally equivalent to owning an options contract. This gives the oToken holder the right to redeem some amount of the underlying asset if the strike price is hit.

For more information please refer to official Ribbon Finance Documentations.

Methodology & Assumptions

All analysis based on data from Feb 1, 2022 onward
For withdrawal of deposited tokens to be completed, user must initiate a withdraw order that after a couple of days, delivered to user(in a separate transaction). during this period, requested amount are removed from the next call positions.
Using the contract address provided on the official page of this vault, the address (2YNj4egax5WV1zSgq9hwJFNzHSYZo2rU7S8BZuMdQMKW) as well as the Ribbon Finance official documentation and the article published by OpenZeppelin about the audit of the Ribbon Finance smart contract on Solana, the general flow of the different transactions of this project was determined.
In the next step, the required information was extracted from the Solana database of FlipSideCrypto.
To start the analysis, one SOL was first deposited in this Vault, the details of which can be seen in the following transaction:

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Who Are The Most Profitable/Losers?

The profit of a wallet is determined when the balance is withdrawn. Therefore, for all wallets whose last action was withdrawal, we have calculated the sum of all deposits and withdrawals and determined the amount of profit or loss of each wallet.

A very important point to note in the charts of capital withdrawals is that this charts are created on the basis of capital withdrawal requests, and each time a withdrawal is made, the capital and the profit of the tokens are returned to the user. On the other hand, at the end of November, the users' profit together with their capital for other users who have not yet requested withdrawal amounts to about 18,000 (the chart in the next section), which indicates that people who have made a lot of profit from this project have not yet withdrawn their tokens.

Weekly Opened Positions

In the second step of the analysis, based on the rollToNextOption method of the Theta Vault smart contract, which determines the number of oTokens received for the next week, we check the number of open positions of this project on a weekly basis.

From April to August, the volume of weekly open positions decreased from 45,000 SOL to 18,000 and has remained almost at this level until now.

Ribbon Finance on Solana : A Brief Overview

Observation #1 : A Brief Overview

The main volume of users and investments in this vault was made in the first three months of the year, which is the first three months of the launch of this project in the Solana blockchain. In these three months we see the highest volume in the entire activity of this project in 2022, and in such a way that more than ninety percent of the investments were made in these three months.
After July, investment and user acceptance of the project dropped sharply, with only about 1,000 SOL invested from that month to the end of November. From the beginning of the year to the end of July, investments amounted to about 60,000 SOL.
Capital withdrawal began from the second month, but by the end of October, only about a quarter of the funds had not been withdrawn. In November, the volume of capital withdrawals has almost reached the total amount of deposited capital.
A very important point to note in the charts of capital withdrawals is that this charts are created on the basis of capital withdrawal requests, and each time a withdrawal is made, the capital and the profit of the tokens are returned to the user. On the other hand, at the end of November, the users' profit together with their capital for other users who have not yet requested withdrawal amounts to about 18,000 (the chart in the next section), which indicates that people who have made a lot of profit from this project have not yet withdrawn their tokens.
The growth chart of new users of this project shows that in the last months new users have been constantly added to this project (on average about twenty to thirty people per month), but their investment volume is very low compared to the first users. The graph of average and median investments in the last months confirms this.
In the first months of the project launch in Solana, the median of investment is much lower than the average, which means that in these first months we see a few users with a high investment volume. But in the months until the end of 2022, the mean and average are almost equal and have reached a value of less than ten SOL.
Although we are witnessing a declining crypto market in mid-2022, the decrease in investment volume shows that this project fails to attract new users and suitable capital. Even the main volume of investments made was returned to users. In the profit analysis section, we can find out the reason for this problem to some extent.

Takeaways

Although in this dashboard we have limited ourselves only to the general statistics of Ribbon Finance on Solana, all statistics show a decline in the adoption of users of this project in the Solana blockchain, and despite the monthly addition of about 20 to 30 people to this project, but the volume of their Solana investment in this project it is very insignificant.

We hope that with the revival of the cryptocurrency market, this attractive project will come back to prosperity.

About Me

Mojtaba Banaei

Twitter : @CryptoLizr

Discord: smbaanie#5528