Support for POOL assets and new Alchemix markets

Simple Summary New markets on Premia allow protocol treasuries to earn yield on their capital while providing their communities with long-term accumulation and hedging opportunities to prevent downside token volatility.

The proposal below is to describe the first implementation of POOL and increase emissions to support four new options pools.

Abstract This proposal is to garner support for updating the emission rate of $PREMIA to provide incentive support to new partners of Premia.

With the completion of Premia's zero liquidity volatility surface architecture, it is now possible to create new, emerging options markets for any asset with a Chainlink price feed. Those markets can then sustain themselves on-chain driven by the capital efficiency provided by Premia’s market-driven options pricing. This is exciting for protocols looking to create capital-efficient opportunities for users within their ecosystem.

Protocol Owned Options Liquidity (POOL), as a new liquidity primitive, allows DAOs and Protocols to bootstrap options/volatility markets for their native tokens. POOL inherently assists in the reduction of sell-side volatility in two ways:

1. Providing a token-sink (the CALL pool), where LPs can deposit protocol tokens for yield and option purchasers can potentially acquire their token of choice at a discount to the spot market through capital-efficient options trades.

2. Providing downside hedging opportunities (in the PUT pool), where LPs can deposit stablecoins for yield and option purchasers can hedge their downside exposure, without selling protocol tokens, in a capital-efficient manner.

In addition to reducing downside volatility, protocols that take advantage of POOL can earn an additional source of revenue for their treasury by activating idle native assets through a supporting options/volatility market on Premia. Protocols can earn fees in the form of premiums in the respective pool token, while also taking advantage of the $PREMIA rewards allocated to their respective pools from our Liquidity Mining program.

This provides many of the benefits of Protocol Owned Liquidity (POL), popularized by OHM, in a symbiotic manner with existing POL systems. Protocol Owned DEX Liquidity provides deeper liquidity to smooth volatility on the DEX sell-side, whereas Protocol Owned Options Liquidity helps significantly reduce sell-side volatility by providing both a token sink, where users can still obtain discounted tokens, and access a new market to hedge downside risks.

When a protocol has both POL & POOL, they are able to deepen their DEX liquidity, while also providing a healthy risk market for users to earn an additional yield on the native token, as well as hedge protocol risk. Hence, there is a strong symbiosis between POL and POOL.

Specification and Implementation Any asset with a Chainlink Price Feed can have a Zero Liquidity Market created. Data collection for surface creation takes approximately one week, after which, a Protocol/DAO needs only to agree to supply assets to a market for one to be supported.

Asset markets and emission allocations must be approved by governance vote by the community via Snapshot prior to any live launch. As our first POOL partner, Premia is looking to support Alchemix and their alAssets. Two separate risk markets will be created:

• ALCX [call] / DAI [put]
• alETH [call] / alUSD [put]

Emissions would be allocated for a minimum of 1 month, and a weekly review allows the community to shift those weights based on the pool’s utilization rates until a more permanent system (vePREMIA) is put in place.

We are excited about the addition of these token pairs to the platform. Alchemix is a staple in DeFi, pioneering their self-repaying loan mechanism. The addition of their protocol token market will add value for Premia users who would like exposure to more DeFi-native assets.

Alchemix users will also be happy to find market-competitive yield on their alAssets (alETH and alUSD), while Premia users will be excited by potential new arbitrage opportunities this pool is likely to introduce as it moves toward market efficiency. Since each alETH is backed 1:1 by ETH and alUSD 1:1 by DAI, this is likely to create arbitrage opportunities between the existing ETH/DAI pool and the new alETH/alUSD pool.

Motivation As our first POOL partner, we'd like to welcome Alchemix warmly to the Premia family. There are many interesting ways that Premia and Alchemix could integrate with one another and we see this as the beginning of a fruitful partnership to begin unlocking the next generation of capital-efficient yields and options markets.

Clarification Protocol emissions began in November at 0.5 PREMIA per block and were raised to 0.75 PREMIA per block in December with the deployment on Arbitrum, to incentivize the additional pools. The emission rate was then voted to be decreased back to 0.5 PREMIA per block and emissions to be weighted heavier on Arbitrum (0.125 to Mainnet, 0.375 to Arbitrum).

The current pool emission weight allocations per asset group are as follows (on both chains):

• WETH: (50%)
• WBTC: (33.33%)
• LINK: (16.66%)

With the addition of the Alchemix pools on Mainnet, the proposed Mainnet allocations are as follows (Arbitrum weights will stay the same, as no pools are being added on Arbitrum):

• WETH (35%)
• WBTC (25%)
• alETH (15%)
• ALCX (15%)
• LINK (10%)

Given the addition of these two new markets, per-block emissions can either maintain the current rate of 0.5 PREMIA per block or be raised to the previous amount of 0.75 PREMIA per block to provide additional support with minimal dilution.

• Vote in Favor/In Support of: Keep 0.5 PREMIA per block (0.125 to Mainnet, 0.375 to Arbitrum)

• Vote in Favor/In Support of: 0.75 PREMIA per block (0.375 to Mainnet, 0.375 to Arbitrum)

• Vote Against/In Opposition of: adding emissions to the ALCX markets