The Revest Protocol: Understanding Covered Call (CC-FNFT) and Put (CP-FNFT) Options
The covered call FNFT (CC-FNFT) option confers to its holder the right to take ownership of the FNFT’s underlying asset on the contract’s maturity date, at a pre-specified price, henceforth referred to as “strike” or “exercise” price. To eliminate default risk, the CC-FNFT’s creator deposits the underlying asset into the smart contract at the outset, so the FNFT holder is guaranteed to receive the underlying asset at maturity, should they decide to exercise their option, hence the term “covered call”. Similarly, the covered put FNFT (CP-FNFT) option confers to its holder the right to exchange one currency for another one, at a pre-determined exchange rate, i.e. the strike price. By design, this structure is also default risk-free, because the CP-FNFT creator deposits the opposite digital asset into the smart contract at the outset.
In the initial launch of the Revest Protocol, CC-FNFTs and CP-FNFTs will be of “European” style only, as the option holders will only be able to exercise their options at maturity, but more flexible exercise privileges will be offered in future, e.g. “American” or “Bermudan” options, in addition to potentially more “exotic” option contracts, as well as various option combinations.
What serves to make the aforementioned CC-FNFTs and CP-FNFTs unique is that they are not constructed within the environment of Revest’s core contracts. They instead are being released as a demonstration of the high-degree of composability offered by Revest; Revest is able to make external calls and pipe output to arbitrary contracts upon withdrawal of any FNFT. These contracts are designated at the time of creation of any given FNFT and must implement the IOutputReceiver interface provided by Revest. When the FNFT in question is withdrawn from, provided it has been prescribed an output receiver, it will send whatever tokens it holds to this contract and call the “receiveRevestOutput” method on the contract in question. This process is implemented in a secure way to avoid re-entrant attacks.
The structure and design of FNFTs will enable them to be used as fundamental building blocks for other DeFi platforms,while allowing those platforms to utilize Revest’s built-in vault at their own discretion. Through this system, along with the ability for third-parties to provide their own UI to Revest FNFTs utilizing this external support, third-parties may construct arbitrary derivatives atop the Revest Protocol. This offers third-parties the advantages provided by the universality of Revest’s FNFTs and a standardized interface with the flexibility to offer more complex value-handling than Revest is designed to handle.
Once CC-FNFTs and CP-FNFTs are constructed on the Revest platform, their creators will be able to auction them off on the NFT marketplace of their choice, such as OpenSea, and create a new, decentralized, and liquid marketplace for call and put options on cryptocurrencies, where none existed before, and an alternative to the “walled gardens” currently offered by existing CEXs in the crypto sphere.
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