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Ribbon Finance (RBN): Complex DeFi Derivatives Simplified

Ribbon Finance is an Ethereum-based crypto derivatives platform that offers streamlined access to complex investment strategies.

By Cryptopedia Staff

Updated October 10, 20233 min read

Gemini-Category Defi 1


Ribbon Finance is a protocol that gives users access to a wide range of structured crypto products with financial options. These products are available through Ribbon’s one-click deposit “vaults,” which make it easy for users to automate complex investment strategies and visualize portfolio changes based on real-time market conditions. Ribbon’s community vaults present opportunities for yield generation that do not rely on token speculation, but are instead based on generating sustainable, risk-adjusted yield. Ribbon Finance tokenomics center on the utility-bearing oToken, its Ribbon Finance token (RBN), and its upcoming veRBN incentives.

What Is Ribbon Finance?

Ribbon Finance is a decentralized finance (DeFi) protocol that offers a wide range of structured crypto products and investment strategies. Ribbon’s DeFi products leverage one-click deposit “vaults” that help users to automate complex investment strategies, and to visualize portfolio breakdowns based on real-time market conditions. Unlike other yield-farming strategies popularized by early DeFi projects such as Curve and Bancor, Ribbon’s community vaults present opportunities for yield generation that do not rely on higher risk speculation on token incentives, but rather focus on sustainable yield generation via rolling investments in derivative options through automated vaults of user-generated funds.

Ribbon Finance stands out in the dynamic DeFi marketplace for a number of reasons. Its vault products offer less risk and steady rewards by streamlining strategies familiar in traditional finance like derivatives, options, and safety-first covered call investments. In doing so, the Ribbon platform makes it much simpler to participate in robust yield strategies developed and audited by a team of financial experts, while avoiding problems that may present in DeFi’s more disruptive and emerging financial products. That’s because the Ribbon crypto protocol uses derivatives like options to generate sustainable, risk-adjusted yield. Users just deposit their assets and let the smart contracts do the rest.

How Does Ribbon Finance Work?

Ribbon Finance seeks to simplify the complex processes of yield generation and derivatives trading for its users by baking strategic options and contract execution into the platform’s own native utility tokens. Ribbon’s options writing strategies utilize Opyn, an Ethereum-based general options protocol that is built upon the Convexity Protocol and uses utility tokens called oTokens. Owning oTokens is the practical equivalent of owning an options contract, and Ribbon users can use oTokens to customize their automated derivatives strategy by inputting specific variables such as the derivative’s time of expiration, strike price, strike asset, and whether it’s a call or put option. From there, users can deposit digital assets into Ribbon vaults, which automatically use the funds to execute their chosen investment strategy, with yields compounded weekly.

Ribbon launched with two primary vaults:

  • Theta Vaults: Ribbon Finance’s main offering, Theta Vaults, allow investors to automate covered calls — relatively lower risk strategies common in traditional finance — while earning significant yields on their ether (ETH) or wrapped bitcoin (wBTC). The vault runs a covered call strategy and reinvests yield earned back into the vault, compounding depositor yields over time. Anyone is free to participate in a Theta Vault for the chance to generate continual, passive income.

  • Treasury Vaults: Treasury Vaults apply the idea of Theta Vaults to decentralized autonomous organizations (DAOs), allowing such organizations to generate passive income with their own native tokens. Treasury Vaults can benefit DAOs that would like to leverage existing assets (without selling their native tokens on the market outright, or borrowing against their assets and risking liquidation). Unlike Theta Vaults, Treasury Vaults are not available to the public, and are run by their respective DAOs, which set their own custom option parameters.

The Ribbon team is also in the process of launching Meta Vaults, which are meant to simplify how developers explore and iterate on existing Ribbon vaults. Meta Vaults will allow users to build on top of a base of covered call- and put-selling vaults and get a cut of the management and performance fees of the base vaults. The goal is for the Ribbon crypto community to launch a vast array of option vaults based on various token and investment strategies. The Ribbon Finance team has indicated its intention to transition into a community-led investment ecosystem after creating and managing the first few vaults.

The Ribbon Finance Token: RBN

The Ribbon Finance token (RBN) is the ERC-20 governance token of the Ribbon Finance protocol, and is used to vote on decisions pertaining to the protocol. In May 2021, a Ribbon Finance airdrop took place — RBN tokens were sent out to early Ribbon supporters in order to decentralize governance processes. The Ribbon Finance team and overall community continue to develop the project’s tokenomics to provide more utility to RBN. Ribbon’s new tokenomics model will be designed to better align the incentives between RBN crypto holders and the yield earned by vault depositors. Three particular areas have been identified as priority benefits for RBN token staking.

The more RBN a user stakes in Ribbon governance:

  • The more RBN rewards they can receive on their staked vault tokens.

  • The more voting power they may have when it comes to redirecting liquidity mining rewards to the vault in which a user is staked.

  • The higher that user’s share of the protocol revenue can be.

Ribbon Finance’s overall tokenomics model is also set to include a new token – veRBN (vote-escrowed RBN) — a third asset of the Ribbon crypto ecosystem. While RBN is Ribbon’s primary governance token, veRBN will provide even further utility and incentives tied specifically to vault rewards and performance, including boosting the RBN rewards earned on staked vault tokens and determining the vault participants’ relative share of protocol revenue. These veRBN tokens will be non-transferrable and more scarce than other Ribbon assets. The only way to obtain veRBN is to lock RBN. One RBN token locked for a period of two years yields one veRBN, meaning that its advanced rewards will be accessible only by loyal and experienced Ribbon users.

The Ribbon Crypto Protocol Simplifies DeFi Derivatives

Despite the explosive growth of DeFi adoption, creating structured financial products on-chain has remained a challenge — in part due to volatile gas costs and low liquidity. The Ribbon crypto platform’s innovative one-click vault solution can greatly reduce the costs of options trading, while offering users a wide range of crypto assets and investment strategies. Additionally, Ribbon’s unique approach to passive yield generation helps avoid many of the pitfalls inherent in the often high-risk, high-reward DeFi token farming ecosystem. Ribbon has even deployed on the Avalanche and Solana blockchains in addition to its original Ethereum deployment, suggesting that lower-risk and lower-reward derivatives remain attractive to many traders, even in the dynamic environment of the crypto market.

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