Perpetual Options
We are focused on abstracting the complexities of underwriting and trading options. Typically users are required to fill in numerous inputs (such as strike price & expiration) in order to purchase a specific options contract. This creates enormous friction for everyday users with no financial background. DeFrag aims to create a seamless process of utilizing put options as insurance for NFT collateral.
As a borrower, you never have to know anything about options or worry about selecting the right strike or expiration because these conditions are automatically calculated by the lending protocol The backbone of the options pricing model is the Black Scholes methodology which we modified specifically for NFTs.
The borrower will deposit their collateral and use it to get a loan. In the background, the protocol calculates the average value of a given NFT, its volatility, and based on your borrow amount the strike is auto-calculated. To start we will set the expiration to 30 days. This means that every 30 days, the system will recalculate the required option contract to be purchased. If all else stays the same (value of your NFT, total loan outstanding and etc.), every 30 Days the repurchased premium put option fee will be added to your cumulative borrowed amount, making your liquidation price slightly increase.
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