Lyra is a DeFi option AMM protocol built on Ethereum and powered by the Layer 2 technology Optimism and the DeFi protocol Synthetix. Lyra was built to address some limitations current decentralized options protocols are facing, limiting their adoptions compared to centralized options trading protocols, which are impermanent loss, extreme risk and low liquidity. Using a layer 2 protocol allowed the team to design the protocol with more freedom regarding the on-chain computation done. The quantification and hedging of risk undertaken by Lyra is achieved by frequently running computationally intensive algorithms. This process would be too expensive to operate within an L1 environment due to gas costs. L2 has enabled Lyra to bring sophisticated hedging techniques on-chain to the benefit of both traders and LPs.
Since the inception of DeFi, we’ve seen numerous option protocols being developed on Ethereum, but this is still an area not as developed as more classic types of DEXs. Lyra is trying to make its protocol the leader of options protocol thanks to the use of Layer-2, enabling it to bring sophisticated hedging techniques on-chain to the benefit of both traders and LPs. As the protocol has not launched on mainnet yet, we still have to wait to see if it lives up to its expectations, but it is definitely a respectable project, despite the small team. There is no token yet.