Dual Finance is a bold example of how Decentralized Finance on Solana provides the perfect experimental platform for new option-based ideas.
The team’s flagship product, called Dual Investment Pools (DIPs), are an advancement to standard Decentralized Option Vaults (DOVs). Among other benefits, DIPs allow for more customized and controlled option yield strategies for token holders.
Dual Finance is able to offer these products in a competitive, capital-efficient and risk neutral manner with the help of Rehypothecated Lending Pools (RLPs) and Staking Options (SOs). The DUAL token built on Solana will be used as a base layer incentivization protocol.
Let’s take a look at some of the advancements Dual Finance is bringing to the Solana ecosystem.
Dual Investment Pools (DIP)
Dual Investment Products (DIPs) are derivative products designed to provide users with additional yield versus HODLing in choppy markets.
They are physically settled options with a menu of strike prices and maturities across tokens to target desired APY and risk tolerance.
DIPs are more functional than SPPs, which are executed sloppily, have gameable properties, and have fixed management fees.
In addition, DIPs offer immediate liquidity, better risk management, more flexibility and control of positions, and more transparency regarding potential negative outcomes.
Staking Options (SO)
The second advancement is a novel liquidity incentive mechanism called Staking Options. This unique feature aligns incentives of users, liquidity providers, and the treasury, which is crucial to a DAO’s success. This concept has many advantages within Dual Finance and more broadly across all of Decentralized Finance.
It offers two subcategories of SOs – General Staking Options and Liquidity Staking Options – that provide users with free out-of-the-money call or put options on DUAL tokens.
This incentivizes protocol token liquidity and allows users to receive rewards with longer term right-way skin in the game. Dual Finance plans to partner with any protocol looking to initiate or revamp their incentivization mechanism by hosting their token’s SOs, enabling them to become the Web3 base layer incentivization protocol.
Rehypothecated Lending Pools (RLP)
Dual Finance allows users to collateralize their deposits with tokens for Upside DIPs or stablecoins for Downside DIPs.
Market makers can borrow tokens from RLPs for hedging purposes, subject to DAO approval, and must return the tokens before any DIPs are exercised.
In the future, Dual Finance plans to partner with other protocols and exchanges to allow for cross-collateralization of DIPs.
Dual Finance (DUAL) tokens are the governance token for the Dual Finance ecosystem, allowing holders to propose changes to parameters, such as strike and maturity selection, and to direct treasury funds for incentivization.
The DUAL Constitution will set parameters such as min/max limits on DIP and SO sizes, moneyness, and maturity, and a DAO will be established to pass business-as-usual proposals.
The ultimate goal of the $DUAL token is to create a DAO and treasury that is rug-pull proof and self-sustaining.
How to create a DIP on Dual Finance
Now let’s move on to using Dual Finance! Make sure you have a Solana-compatible wallet with some SOL inside to start.
It is important tot note that Dual Finance accepts BTC, ETH, and SOL – but only if it’s on the Solana blockchain (SPL).
Navigate to dual.finance and click on the “Pools” tab.
We suggest checking the “Beginner Mode” box, unless you have big brain and want to use all the features.
Set the price you want to sell at, and then click the “Next” button. Make sure to use a number that fits your risk profile!
Set the amount of $SOL you want to allocate to this position
Click the “Next” button again, and you will arrive at a screen that looks like this:
This is an important screen because it shows you what the outcomes are for your position depending on the outcome.
ITM stands for “in the money”, and OTM stands for “out of the money”
Check both boxes to accept the terms of your position and then click Next. Repeat the process on the confirmation screen, and you are done!
To see your position, navigate to the “Balance” section as shown below: