New System Cuts Time and Costs in Cross-Chain Crypto Options Trading

Table of Links

1. Abstract and Introduction

2. Preliminaries

3. Overview

4. Protocol

   4.1 Efficient Option Transfer Protocol

   4.2 Holder Collateral-Free Cross-Chain Options

5. Security Analysis

   5.1 Option Transfer Properties

   5.2 Option Properties

6. Implementation

7. Related Work

8. Conclusion and Discussion, and References

A. Codes

• A.1 Robust and Efficient Transfer Protocol
• A.2 Holder Collateral-Free Cross-Chain Options

B. Proofs

• B.1 Transfer Protocol Proofs
• B.2 Option

8 CONCLUSION AND DISCUSSION

In this paper, we proposed an approach for efficient and collateralfree cross-chain option. Compared to an HTLC-based option, our

approach adds a signature scheme DAPS to facilitate efficient option transfer, reducing the transfer time to half of that of previous work. Akin to traditional options, our approach does not require the option holder to put a collateral upfront when an option is established, thus make the most of the advantages of options for leveraging and hedging. With our proposed method, the option markets can be more efficient.

One key feature of our proposed protocol is its resilience against phantom bidder attacks. The protocol supports concurrent bidding and can finalize the option transfer in a constant time, not influenced by potential malicious option buyers.

In the practical application of this protocol, we can also fully utilize the liquidity of the writer. For example, Bob, the option seller, can still use the funds in the contract for trading, provided that the transaction is completed in a single trade and the assets are returned to the contract at the end of the trade. This is similar to a flash loan but without extra transaction fees.

The options we explored in this paper are actually covered options. In option markets, there are other types of options, for example, naked options where sellers must maintain their margin accounts at a threshold according to market fluctuations, otherwise face liquidation. In the future, we are interested in designing naked options with liquidation features and consider how to ensure the rapid transfer of cross-chain (naked) options.

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