July 9, 2023

Decentralized finance (DeFi) was created as a counter-movement to the traditional finance industry. It sought to create a system unburdened by TradFi’s bureaucracy, secrecy, and red tape – one built on core principles of openness, transparency, accessibility, and freedom from centralized control. 

DeFi’s freedom from the constraints of traditional finance may have fueled an explosion of new types of assets and financial instruments that investors of all stripes and sizes can use for wealth creation, but that doesn’t mean we have to leave all the TradFi tools behind. 

Better to retain the best of the old world, and leave behind the bad: the inefficiency, exclusiveness, and dependence on centralized gatekeepers. 

That’s why we created PsyFi: to integrate the breadth and versatility of traditional finance products with the trustlessness and composability of DeFi. And that’s why we are hard at work assembling the most robust, feature-rich financial services offerings in the DeFi ecosystem – for end-users as well as other projects. 

From Hackathon Winners to $100M TVL 

When we first began exploring Web3, we realized that options – a well-known and popular product in the TradFi sphere – were missing from the DeFi world. Given the huge range of digital assets being generated every day, hour, and minute, it became clear to us that DeFi was the perfect place for a decentralized options protocol capable of handling them all. 

Then in 2021, the team behind PsyFi – then known as PsyOptions – won the Solana x Serum DeFi Hackathon for bringing American-style options to the Solana ecosystem. Progress was swift: PsyOptions, a permissionless options infrastructure that offers both American and European-style options, launched on the Solana mainnet in August of the same year.

We’ll go into more detail in later installments of the PsyFi Learn series, but briefly, options are contracts that give their owners the right to buy a given asset at a predetermined price. While European-style options can only be taken up on a set date, American-style options can be exercised at any time up to expiry. 

In other words, the perfect place for PsyOptions. 

Building a Toolset for the DeFi Ecosystem 

By the start of 2022, the platform had garnered more than $100 million in total value locked (TVL) and the team began expanding its product offering. Our goal was twofold: to bring traditional financial instruments to DeFi, and offer investors capital-efficient DeFi-native tools and products that would help them securely maximize their earning potential. 

Here are a few members of the current suite: 

  • PsyVaults help investors generate sustainable returns on digital assets. Each vault uses PsyOptions to execute an automated trading strategy that earns stable, non-inflationary yields. We’re also working on adding in returns from sustainable liquidity provision to PsyVault yields. More to come on this soon!

  • PsyLend is a highly capital-efficient lending platform that lets users borrow against their vault positions. PsyLend lets people use liquidity provision tokens on existing protocols. This unlocks the liquidity within structured products, and creates a synthetic hedge against decentralized option vaults’ underlying asset prices.

  • Fusion is an airdrop-as-a-service platform that allows users to airdrop call options. New projects can use Fusion to send targeted rewards to active users and contributors, while growing retention and aligning long-term incentives with the demands of community members. Projects like Jungle Finance and Solend are already using Fusion to grow their communities. 

DeFi Financial Products for Any Risk Appetite 

PsyFi’s growing roster of products and tools are designed to serve a wide range of potential users – from causal crypto dabblers to full-flown DeFi degens – based on their level of experience and appetite for risk. 

PsyOptions, for instance, is perfect for someone with previous experience trading financial contracts and a clear understanding of how options can create profit. 

PsyVaults, meanwhile, automatically execute option-based trading strategies, which makes them ideal for the less experienced investor who wants to experience the low risk and high returns offered by structured products. Since vaults do not rely on high-risk sources to generate yield, they may also suit investors with lower risk appetites. 

And once vault users have a sense of how structured products work and wish to adjust their risk-return profiles, they can use PsyLend to explore investment options across the DeFi world. 

PsyFi’s Security: Rooted in the Principles of Decentralization 

Crucially, the safety and security of PsyFi’s entire suite is rooted in the principles of transparency, decentralization, and open-source technology. The code that underlies our products is always visible online for investors to view. And PsyFi’s code is regularly audited by trusted third parties: you can view the results of our most recent audit, conducted by Kudelski Security, here

And since community ownership is embedded in our DNA, the entire PsyFi suite falls under the purview of the PsyFi DAO, which is in turn governed by our community of $PSY holders. Using Realms governance, token holders play a crucial role in shaping the future of the whole PsyFi ecosystem. For more information on current governance proposals, click here.

We set out on this journey with one goal in mind: to offer DeFi users everywhere access to best-in-class financial tools that fit their level of experience and risk appetite. This vision has guided all we have done to date – and all we will do in future.

This is the first of a series of PsyFi Learn guides that will take you through the basics of PsyFi and the essentials of DeFi, the financial system of the future – powered by the best that TradFi has to offer.

It has been a great ride so far. To learn more, join us, or start investing, check out PsyFi.io