Opium Protocol V2

Introduction

Opium v2 is a permissionless smart financial escrow protocol that allows its users to create fully customizable financial products. Its primary use-case is the management of derivatives, which are represented as a pair of LONG and SHORT ERC20 Opium position tokens. As a financial engineer, you can easily create a derivative contract with Opium v2 and be rewarded a portion of the reserves accrued by the protocol for each successful settlement of your own financial products. As a seller and buyer, you can partake in (for example) PUT or CALL options on an underlying by holding a specific Opium position token, you can exchange them on an AMM, exercise them at expiry or redeem them for initial margin if you hold an equal amount of LONG and SHORT positions. The focus of the design is to be as lean as possible as to enable the greatest flexibility and interoperability with other financial primitives.

Changelog from Opium Protocol v1

Completely removed pooled derivative logic
Changed ERC721o to ERC20: LONG and SHORT position tokens and removed TokenMinter contract
Removed all Matching contracts, as ERC20 positions are compatible with protocols like 1inch Limit Order Protocol and 0x
Changed Solidity version to latest with best practices refactoring
Changed create to support amounts instead of quantities (fractional derivatives)
Separated create process into create and mint to reduce gas costs
Changed execute to support amounts instead of quantities (fractional derivatives)
Added redeem derivatives function to burn LONG + SHORT in return of initial margin
Added upgradability
Added emergency mechanisms
Added governance and roles
Performed additional refactoring and optimizations

Core protocol modules

Derivative author fees and protocol reserves

Execution

Derivatives authors can set a fee (limited) on the profit that trades make from execution. Part of this fee goes to protocol execution reserves and the rest goes to the derivative author.

Example:

Name

Value

Redemption

Name

Value

Security measures

Derivative data cache

Since all syntheticId’s (derivative logic contracts) are third party contracts that are being consumed by the protocol, protocol MUST consider them as potentially malicious and act accordingly. This is why all data consumption calls (except derivative parameters validation) are only made once and are stored in cache thereafter.

P2P Vaults

As an additional security measure there was introduced a so-called “P2P Vault”, which’s only purpose is a bookkeeping of cash flows for each particular derivative (ticker). It’s being increased on every incoming cash flow and deceased on every outcoming cash flow. It’s decreasing by greater value that it counts at the moment will result in transaction’s reverting.

This bookkeeping helps to prevent any potentially (not yet known) malicious derivatives from stealing funds withheld for other derivatives settlement.

ACL

Upgradability

All the core contracts of the Opium Protocol are upgradeable. The upgradeability is ensured by the openzeppelin’s “@openzeppelin/contracts-upgradeable” library which uses the unstructured storage proxies pattern and it is assumed that it safely protects from storage clashes between the proxy contract and the implementation contract. However, in order to avoid storage layout collisions between different implementation contract versions we have added a fixed length uint256 array (with 50 as length everywhere except for the OpiumPositionToken) which is assumed that will allow up to 50 storage slots (or 30 storage slots for the OpiumPositionToken) to add new variable/modify the contract without shifting down the storage layout and cause clashes.