Introducing Tap Finance

Published on: 02.11.2021

Tap Finance is an automated options strategy vault built on Solana.

Tap Finance’s vision is to offer sustainable yield for single token assets through options strategies to the Solana Ecosystem.

Over the last three months, Tap Finance has been building the infrastructure and partnerships to launch on Solana Devnet. They have partnered with PsyOptions for initial vaults to mint composable on-chain options. They also working with some of the largest market makers in the crypto options space to provide deep liquidity for our options.

Why Solana?

Solana offers a unique opportunity to lower the barrier of entry for any user, regardless of how much capital they have, to participate in DeFi. The fundamental primitives of a complete financial system are nearing completion, though some key pieces are still missing. Tap Finance will add to the Solana ecosystem to fill those gaps by creating structured yield generating products.

Tap Finance Initial Product

Their initial vault will run a USDC-collateralized BTC Put selling strategy. Users can provide USDC to Tap’s vaults, which will then be used to mint out-of-the-money BTC Put options through PsyOptions on a weekly basis. Those Puts will be sold for USDC either to market makers OTC or through PsyOption’s Serum-integrated order book.

Since the options are far out-of-the-money and their tenor is weekly, they generally will not be exercised and all the USDC from their sale will be distributed to the vault users, thus generating the weekly yield.

Tap Finance uses a backtested model to set the strike price for the Put options. Currently, that model predicts yields on USDC which are over 20% APY.

Why Use Options Strategies?

There are numerous ways to generate yield on your assets in DeFi. Some of the most popular methods are staking LP pairs or lending. Many of these methods offer sustainable single-digit yields. Double-digit yields come into play usually through inflationary token mechanics, i.e. distributing protocol tokens to incentive protocol use.

While token incentives are a great way to kickstart the community, they won’t last forever. As DeFi founder of Alchemix, Scoopy Trooples notes “Liquidity Mining is Like a Drug; You Have to Wean Yourself Off it Over Time”.

Tap Finance mission is to create sustainable ways for users to generate double-digit yields, in both bull and bear markets, without the need to rely on the inflationary token distribution.

With Tap Finance, you can expect to earn consistently high yields on your single token asset without ever considering what token you’ll be receiving yield in.