The Evolution of PsyOptions on Solana

PsyOptions has been a pioneer in the Solana ecosystem, evolving alongside the blockchain since its early days. Tommy Johnson, co-founder of PsyOptions, shared the company's journey from its inception to its current position as a key player in Solana's DeFi landscape. The story begins with Tommy and his twin brother, who were initially drawn to Solana after following Multi-coin Capital's Kyle Samani's posts about the blockchain in 2018 or 2019.

Their first foray into Solana development came during the blockchain's inaugural hackathon in November 2020. Although their initial project - a third-party trusted Oracle system - didn't place, it laid the groundwork for their future endeavors. Undeterred, the brothers continued to explore the possibilities within the Solana ecosystem.

A month later, inspired by the desire to automate an options trading strategy that their traditional brokerage wouldn't support, they decided to build their solution on Solana. This decision proved to be a turning point, as they ended up placing first in the subsequent hackathon alongside Mango Markets. Tommy recalled, "As soon as that happened, investors were just reaching out. We had no plans to create a company or take this on full-time and just go all in. But when you have people kind of offering you money and telling you how big this thing's going to be, it's kind of hard to just say no."

The Transition from Concept to Company

The success of their hackathon project catapulted PsyOptions from a concept to a full-fledged company. However, the transition wasn't immediate. Tommy explained that it took about six months to set up the legal structure, plan for a future token, and raise capital. Once these pieces were in place, they were able to dive in fully and begin building out their vision for options trading on Solana.

Over the next two years, PsyOptions underwent several iterations and pivots. They initially focused on order book-based options trading but found that demand wasn't sufficient to sustain the product. Tommy noted, "We shut down the original options trading that was order book based trading with options because there just isn't enough demand there. There's not enough on-chain volume."

Expanding the Product Suite

Recognizing the need to adapt to market conditions, PsyOptions expanded its product offerings. They acquired Tap Finance out of Singapore, which led to the development of structured products. Additionally, they created an over-collateralized borrowing and lending protocol that accepted these structured product tokens as collateral, enhancing capital efficiency for users.

However, as macroeconomic conditions shifted and interest rates rose, the risk-reward profile of some of these products became less attractive to investors. This led to a decrease in Total Value Locked (TVL) and prompted PsyOptions to once again pivot and explore new initiatives.

Armada: A New Frontier in Token Launches and Liquidity

Currently, PsyOptions is focusing on three main initiatives, with the highest conviction placed on their new platform called Armada. Tommy described Armada as a solution to some of the biggest challenges facing the Solana ecosystem: "When you look at the Solana ecosystem, the biggest issues facing it right now is lack of high-quality tokens with quality value accrual tokenomics and just on-chain liquidity. And that's the goal of that one."

Armada is designed as a comprehensive platform to assist projects in launching tokens, improving on-chain liquidity, and implementing effective tokenomics. It comprises several key components:

1. Liquidity Bootstrapping Curve: This feature allows teams to create custom auction-style curves for token launches, enabling price discovery and fundraising.

2. Concentrated Liquidity Market Making: Built on top of concentrated liquidity pools like Orca's Whirlpool or Raydium's concentrated liquidity pools, this program delegates market-making capabilities to institutional market makers, potentially improving capital efficiency and liquidity depth.

3. Discount Token Standard: This incentivization mechanism allows projects to offer perpetual discounts on their tokens, creating variable incentive structures that can benefit both the project and token holders.

Tommy emphasized the importance of bringing liquidity on-chain: "We want to make on-chain the best place to trade these tokens. And then also help with incentivization mechanisms to bring more liquidity to those new pairs."

Improving Tokenomics and User Experience

One of the key focuses of Armada is to address the issues surrounding poor tokenomics that have plagued many crypto projects. Tommy acknowledged the problems caused by indiscriminate liquidity mining programs and emphasized the need for more thoughtful approaches:

"I think it comes down to poor tokenomics and poor thoughtfulness of the token. When you think about the liquidity mining stuff where you're just dumping amounts of tokens into liquidity pools and whales are just sucking it up and they're just notoriously selling as soon as those tokens come in... So I think it's more about thoughtful incentive mechanisms, thoughtful tokenomics of how does value accrue back to the token so that way you can make sure that outflows or the selling pressure is offset by some sort of buying pressure coming from some sort of value accrual tokenomics."

The team at PsyOptions is working on creating a more transparent and user-friendly ecosystem where token flows and governance participation are clearly visible and easily manageable. This includes streamlining the decision-making process for users regarding staking, providing liquidity, or participating in governance.

The Challenges of DeFi Development

Tommy shared insights into the challenges of building in the DeFi space, particularly during the volatile market conditions of the past year. He described the experience as a series of "ocean moments" with significant catalysts occurring almost every quarter, leading to step-downs in the market.

Despite these challenges, Tommy highlighted the benefits of the bear market for developers: "I think from the development standpoint, the ecosystem got a lot more quiet. Like it was, it's really hard in the bull market. There's so much noise. There's so much competition."

This quieter period has allowed the team to focus on building and refining their products without the distractions and intense competition characteristic of bull markets.

Responsible Capital Management

One of the key factors that has allowed PsyOptions to weather the market downturn has been their approach to capital management. Tommy explained their conservative strategy:

"We're fortunate enough to raise a lot of capital in 2021. And we didn't over hire. We don't overspend on engineers. We are never paying egregious amounts. We trained most of all our smart contract developers. Like we've trained ourselves. Just took good cybersecurity professionals or things like that. And so we've never tried to chase insane yields."

This prudent approach to finances has positioned PsyOptions to continue building and innovating even in challenging market conditions.

The Global Potential of DeFi

While discussing the future of DeFi, Tommy emphasized the potential for global impact, particularly in regions where traditional financial services are less accessible or reliable. He noted that while US citizens might not face significant hurdles with traditional finance, the same is not true globally:

"I think for us, we don't run into headaches with the traditional finance or lack of banking or lack of accessibility to certain things unless you're going and asking for API access or trying to get direct order book based data. Like you don't hit walls unless you're going to some weird deep corner that you need to be working at a big incumbent to get access to. But on the global side, like that's not really the case."

This global perspective underscores the potential for DeFi to provide financial services and opportunities in areas where traditional finance falls short.

Educating Users and Improving Transparency

A significant portion of the discussion focused on the need for better education and transparency in the crypto space. Tommy acknowledged the challenges faced by newcomers in understanding the risks and complexities of DeFi products:

"As developers, right, for us, like we can read these contracts if they're open source and analyze them and build our trust. But the laymen does not have access to that. And it's hard, I think, you know, we had anchor's repository for like open sourcing stuff, but and that was great for making sure things are open-sourced and validating that what's on chain was actually what was published to that anchor repository. But it's still like to the laymen like, what the hell are they looking at, right? How do they determine if this thing is safe or not?"

This recognition of the knowledge gap has influenced PsyOptions' approach to product development, with a focus on creating more transparent and user-friendly interfaces.

The Future of Armada and PsyOptions

Looking ahead, Tommy expressed high conviction in the Armada platform and its potential to address key issues in the Solana ecosystem. He announced that Armada is expected to go public within the next month, likely before the Breakpoint conference.

The team is also working on what they call "V2" of Armada, which will focus more deeply on tokenomics and governance integration. This next iteration aims to provide a more holistic view of token ecosystems, helping users understand how tokens flow throughout an organization and make informed decisions about their participation.

Balancing Institutions and Individuals in DeFi

An interesting point of discussion was the balance between institutional and individual participation in DeFi. Tommy acknowledged that as yields become attractive, institutions are likely to enter the space, potentially affecting returns for individual investors. However, he noted that on a dollar-for-dollar basis, individuals can still access the same opportunities.

The challenge lies in maintaining the ethos of democratization that is central to the crypto space while also attracting the liquidity and stability that institutions can bring. Tommy suggested that while it may not be possible to completely solve this dilemma, creating transparent and fair systems is crucial.

Learning from Experience in Crypto

Both Tommy and the hosts shared personal experiences of learning in the crypto space, emphasizing the value of hands-on experience. They agreed that allocating a small amount of capital that one is willing to lose entirely can be an effective way to learn about the intricacies of DeFi and crypto trading.

Tommy shared his own journey of learning, from early retail trading to diving deep into quantitative finance books and discussions with market makers. He highlighted the advantage of learning in the DeFi space compared to traditional finance:

"That's a beautiful thing about DeFi, right? The democratization of this stuff. You can mess with an order book and mess with trading and market making, but in traditional finance, like if you want actual order book data, like you have to pay for that. And like it's not cheap. And so you can kind of get a much faster learning curve in this world than in the traditional finance world."

Conclusion: Building for the Future of Solana DeFi

As the conversation wrapped up, it became clear that PsyOptions, under Tommy's leadership, is committed to addressing some of the most pressing issues in the Solana DeFi ecosystem. Through initiatives like Armada, they are working to improve token launches, enhance on-chain liquidity, and create more robust tokenomics models.

The team's experience through both bull and bear markets has shaped their approach, leading to a focus on sustainable growth and responsible development. As they prepare to launch Armada and continue refining their product suite, PsyOptions is positioning itself as a key player in the evolution of Solana's DeFi landscape.

With a commitment to education, transparency, and user-friendly design, PsyOptions is not just building products but also contributing to the maturation of the entire ecosystem. As Solana continues to grow and attract both retail and institutional interest, companies like PsyOptions will play a crucial role in shaping the future of decentralized finance.

Facts + Figures

• PsyOptions was founded after winning a Solana hackathon in early 2021, alongside Mango Markets.
• The company initially focused on order book-based options trading but pivoted due to insufficient demand.
• PsyOptions acquired Tap Finance from Singapore to develop structured products.
• The company created an over-collateralized borrowing and lending protocol accepting structured product tokens as collateral.
• PsyOptions is currently focusing on three main initiatives, with the highest conviction placed on the Armada platform.
• Armada is designed to assist projects in launching tokens, improving on-chain liquidity, and implementing effective tokenomics.
• The Armada platform includes a Liquidity Bootstrapping Curve, Concentrated Liquidity Market Making, and a Discount Token Standard.
• PsyOptions raised significant capital in 2021 and maintained conservative spending practices.
• The company trained most of its smart contract developers in-house.
• Armada is expected to go public within the next month, likely before the Breakpoint conference.
• PsyOptions is working on "V2" of Armada, which will focus more deeply on tokenomics and governance integration.
• The team emphasizes the importance of thoughtful tokenomics to offset selling pressure with buying pressure.
• PsyOptions aims to make on-chain trading the best place for token transactions in the Solana ecosystem.
• The company recognizes the need for better education and transparency in the crypto space for retail investors.
• Tommy Johnson, co-founder of PsyOptions, has a background in electrical engineering before transitioning to software and crypto.

Questions Answered

What is PsyOptions and how did it start?

PsyOptions is a DeFi company that began after winning a Solana hackathon in early 2021. It was founded by Tommy Johnson and his twin brother, who initially created an options trading platform on Solana. The company has since evolved to offer various DeFi products and is currently focusing on launching the Armada platform to improve token launches and liquidity in the Solana ecosystem.

What is the Armada platform?

Armada is a comprehensive platform developed by PsyOptions to address key issues in the Solana ecosystem. It aims to help projects launch tokens, improve on-chain liquidity, and implement effective tokenomics. The platform includes features such as a Liquidity Bootstrapping Curve for token launches, Concentrated Liquidity Market Making for improved liquidity, and a Discount Token Standard for incentivization.

How does PsyOptions approach tokenomics?

PsyOptions emphasizes the importance of thoughtful tokenomics to create sustainable token ecosystems. They focus on developing mechanisms that ensure value accrues back to the token, offsetting selling pressure with buying pressure. The team is working on creating more transparent systems that allow users to easily understand token flows and make informed decisions about staking, providing liquidity, or participating in governance.

How has PsyOptions managed to survive the recent crypto market downturn?

PsyOptions has weathered the market downturn through responsible capital management. The company raised significant capital in 2021 but maintained conservative spending practices, avoiding overhiring and excessive expenditures. They also focused on in-house training for smart contract developers and didn't chase unsustainable yields, which has allowed them to continue building and innovating even in challenging market conditions.

What is Tommy Johnson's background and how did he get into crypto?

Tommy Johnson has a background in electrical engineering before transitioning to software development. He got into crypto around 2016-2017, doing some Solidity work and minor investing. He went full-time into crypto a little over two years ago and has been developing on Solana for about three years. His journey from hardware to software to finance demonstrates the interdisciplinary nature of the crypto industry.

How does PsyOptions view the future of DeFi?

PsyOptions sees significant potential for DeFi, especially in global markets where traditional financial services are less accessible. They believe that DeFi can provide financial opportunities in areas where traditional finance falls short. The company is working on creating more user-friendly and transparent DeFi products to encourage wider adoption and improve the overall ecosystem.

What challenges does PsyOptions see in educating users about DeFi products?

PsyOptions recognizes the difficulty in educating laymen about the complexities of DeFi products and smart contracts. They acknowledge that while developers can read and analyze open-source contracts, average users struggle to determine the safety and reliability of these products. The company is focusing on creating more transparent and user-friendly interfaces to bridge this knowledge gap and improve user trust in DeFi products.

When is Armada expected to launch?

According to Tommy Johnson, Armada is expected to go public within the next month, likely before the Breakpoint conference. The team is also working on a "V2" of Armada, which will focus more deeply on tokenomics and governance integration, providing a more holistic view of token ecosystems.