2024/10/21 by Peng, Zifan, Yingjie Xue, Jingyu Liu +2
Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #Cryptography and Security (cs.CR) #Economic theories and models #Emerging Technologies (cs.ET) #FOS: Computer and information sciences #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2410.15724
openalex publication_date 2024/10/21 · openalex created_date 2024/11/06 · openalex updated_date 2026/07/28
Options are fundamental to blockchain-based financial services, offering essential tools for risk management and price speculation, which enhance liquidity, flexibility, and market efficiency in decentralized finance (DeFi). Despite the growing interest in options for blockchain-resident assets, such as cryptocurrencies, current option mechanisms face significant challenges, including a high reliance on trusted third parties, limited asset support, high trading delays, and the requirement for option holders to provide upfront collateral. In this paper, we present a protocol that addresses the aforementioned issues. Our protocol is the first to eliminate the need for holders to post collateral when establishing options in trustless service environments (i.e. without a cross-chain bridge), which is achieved by introducing a guarantee from the option writer. Its universality allows for cross-chain options involving nearly any assets on any two different blockchains, provided the chains' programming languages can enforce and execute the necessary contract logic. Another key innovation is reducing option position transfer latency, which uses Double-Authentication-Preventing Signatures (DAPS). Our evaluation demonstrates that the proposed scheme reduces option transfer latency to less than half of that in existing methods. Rigorous security analysis proves that our protocol achieves secure option trading, even when facing adversarial behaviors.