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Simply Explained: Premia (PREMIA)

In early 2022, we executed our $1 Quadrillion Bet series focused on the emerging, and oh so exciting, DeFi Derivatives sector. In the series, we discussed why we believe the decentralised finance sector is primed to take a huge market share from traditional finance. We highlighted the most interesting projects in the space, their fundamentals, and our price projections.

One of the projects we covered was Premia. For our detailed breakdown of Premia, check out our full report here. For a light read that discusses the basics of the project in a few minutes, settle into this Simply Explained.

What is Premia?

Premia is a decentralised finance options protocol. It allows users to provide liquidity to, or buy and sell options from, a liquidity pool. Premia enables the trading of options, allows users to earn a market yield on DeFi assets and provides protection to users through hedging risk.

Hold on, Cryptonary, what are Options?

Options are instruments that give holders the ability to purchase an asset at a set price at a certain point in the future. For a more detailed look at options, check out our guide here.

Selling Options

Selling options is a complex process than buying them. It requires specialist knowledge to decide on different metrics. Market makers and sophisticated traders use such strategies in traditional finance. This is highly complex and difficult for individuals to get into.

DeFi platforms like Premia are allowing previously impossible things to become possible- such as allowing users to benefit from the returns of options selling, simply by depositing their assets into a pool. 

Premia runs a peer-to-pool market-making model. This means that when you purchase an option on Premia, it is sold to you by the pool. This pool is a DeFi Option Vault (DOV), which other users deposit into. DOVs democratise the process of selling options and removes the requirement to match options sellers and buyers. It also enables liquidity providers to earn passive yield without actively writing or managing options.

Check out our tutorial here for a detailed breakdown of how to use Premia.

What does the PREMIA token do?

The PREMIA token serves two main use cases. Firstly, it is a revenue-sharing token that grants holders a small percentage of revenue produced by the company, which is currently around 2-3%. Secondly, it serves as a governance token through which holders can vote on certain proposals the team presents.

Conclusion

Cryptonary is bullish on DeFi Derivatives, and we have a lot to say about Premia. These Simply Explained pieces aren’t for our opinions, plans, or projections. They’re here to give you a base level of understanding so you can appreciate the premium reports and make the most of them. I highly encourage you to read through our $1 Quadrillion Bet series and the Premia deep dive.

 

Disclaimer: THIS IS NOT FINANCIAL OR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

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