What is Thales?
Does crypto feel like gambling from time to time? We all known that short-term price movements often have little to do with the long-term performance of a crypto project. For trades who like to capitalize on the short time frames, Thales is the answer. With a simple interface, Thales combines crypto trading with the traditional betting system in sports, namely parimutel markets.
Parimutel markets, or binary options, is a system that existed since the time of the Greeks. The name of the protocol is inspired after the great thinker Thales of Miletus, who became wealthy after speculating on a bountiful olive oil harvest. Fast-forward to our days, Thales – the protocol – offers the same tools so that others can become wealthy on their knowledge.
Thales is a DeFi protocol that runs on the layer-2 solution Optimism. Because the transactions are finalized on the Ethereum blockchain, users can rest assured about the immutability of their transactions.
Optimistic Ethereum enables users to make Ethereum transactions for pennies. Reducing transaction costs to interact with the Ethereum network to a few cents is crucial in bringing more users to the protocol. This means Thales can accommodate more users who can focus on making money rather than spending their gains on fees.
Liquidity is an important factor in assessing the health of a DeFi protocol. This metric represents the amount of capital inflow and it helps stabilize the liquidity pools. More liquidity means users can exit the protocol without experiencing severe slippage.
The average TVL on Thales hovers in the $100M range, which is impressive for a unique project like Thales. According to the project roadmap, Thales is still under development – a native token is yet to be announced and liquidity bootstrapping is still ongoing.
Parimutuel markets on the blockchain is still a novel concept. Users who are familiar with sports betting will find it easy to use the platform, as it relies on winning odds.
In Parimutuel Markets, collateral is placed in a single shared pool, and that pool is awarded to winning participants after a market-settling event has occurred. The difference from a sportsbook betting is that Thales settlements are done on-chain. No central entity can meddle with the results and payouts are done automatically by the protocol. With no KYC checks in place, anyone can fairly participate in Thales markets.
Thales integrates 0x’s permissionless order books for trading tokens that represent binary options positions before their expiry date. The protocol supports the whole lifecycle for a binary options market on virtually any Chainlink supported price feed, including dozens of crypto assets, commodities, equities, and unique index data feeds.
The entire Thales infrastructure runs on Ethereum smart contracts. As good as it is for decentralization, code can be prone to hacks. Thales has several security mechanisms in place to prevent hacks.
The protocol integrates Chainlink's price feeds to prevent price manipulation. Chainlink is the biggest oracle provider in the crypto space. With price fees aggregated from on-chain and off-chain sources, users bear little to no risk of getting liquidated due to an oracle failure.
If audited code isn't enough, Thales is governed by a trio of decentralized autonomous organizations (DAOs) which enable the community to manage the protocol.
Each of the three core DAOs work together to fill different roles within the protocol. By distributing responsibility to community members who are voted in by their peers, Thales is able to maintain high levels of transparency and accessibility.
The governance structure will rely on the THALES token (coming soon) and the Thales Council. In honor of the Seven Sages of Greece, the Thales Council will consist of 7 members elected by token holders who have staked THALES in return for voting weight. Each epoch will last 6 months.
If all the above mechanisms fail, Thales has one last trick up their sleeve – the Safebox. To mitigate this risk of insolvency, Thales has implemented a “Safebox” strategy where a small percentage of the fees collected from AMM trades and other Thales products will be stored in a separate contract to be used as a safeguard against extreme market volatility.
The funds collected in the Safebox contract are controlled by the Thales Council. While these funds are used to secure AMM from insolvency, once the contract contains a certain threshold, these funds will be used to benefit stakers.
How does Thales work?
Thales offers a superior binary trading experience on the Ethereum network, being the first project specifically focused on these exotic derivatives on-chain. In simple terms, Thales lets users bet on the price action of crypto assets and sports events using the sportsbook model – only it's fully decentralized.
In a binary options trade, a trader makes a prediction on whether the price of an asset will go up or down within a certain timeframe. If the trader's prediction is correct, they receive a fixed payout, typically a percentage of the initial investment. If the prediction is wrong, the trader loses their investment.
In a DeFi protocol, the binary options trading is conducted using smart contracts that are executed on a blockchain network. These smart contracts act as intermediaries between the trader and the market, and they automatically execute the trade based on the terms of the contract.
The terms of the contract typically specify the duration of the trade, the asset being traded, the strike price (the price at which the asset can be bought or sold), and the payout percentage if the trade is successful. The trader chooses whether to buy a call option (betting on a price increase) or a put option (betting on a price decrease), and enters into the contract by locking their funds into the smart contract.
If the price of the asset moves in the trader's predicted direction within the specified timeframe, the smart contract automatically executes the trade and pays out the predetermined amount to the trader. If the price moves in the opposite direction, the smart contract will expire worthless and the trader will lose their initial investment.
Starting from the general mechanics of binary markets, let's explore each product on Thales!
Tokenized Positional Markets
Positional markets refer to a type of financial market where traders buy or sell assets with the intention of holding onto them for an extended period of time, typically for weeks, months, or even years.
Thales' Positional Markets can have two possible outcomes: up or down. These positions are in the form of ERC20 tokens that represent the traders' bet.
If the position is UP, then the payout is issued for the price acting positively. Conversely, DOWN tokens ensure your payout if an outcome resolves negatively.
Positional Markets on Thales are each a dedicated market smart contract and are 100% collateralized by sUSD. Once this collateral is locked into the market’s smart contract, Positional Tokens are minted and made available for interested traders via the AMM. Every 1 sUSD locked into a Market Smart Contract mints 1 of each Positional Tokens (e.g. 1 sUSD -> 1 UP token + 1 DOWN token).
The winning side of the market will have the ability to redeem their Positional Tokens in a 1:1 ratio for the sUSD collateral added to the pool, while the Positional Tokens of the losing side will become worthless and cannot be redeemed.
Tokenized Ranged Markets
Ranged markets refer to a type of financial market where the price of an asset is trading within a certain range, moving up and down between a defined level of support and resistance.
Ranged Markets use the same framework as the Positional Markets, but they use a Price Range instead of Positional Markets Strike Price, to resolve the market.
Instead of having a single Strike Price with accompanying UP and DOWN tokens, Ranged Markets have two Strike Prices that construct a Price Range and are accompanied with IN and OUT ERC20 tokens that represent two exclusive outcomes of the said Ranged Market.
sUSD
Thales Markets accept sUSD, the native stablecoin of the Synthetix ecosystem, as the main form of collateral. Synthetix is a decentralized finance pioneer known for being innovative, open-sourced and governed by the community. This makes sUSD fully decentralized.
Synthetix stakers deposit the ERC-20 token SNX to "mint" sUSD. By minting sUSD a staker enters a debt position against the changing market value of their SNX collateral. To ensure the stability of the Synthetix platform and the value of sUSD, stakers are required to overcollateralize their SNX deposit by several times the value of the sUSD that they've minted.
How to make money on Thales?
The main ways of making money on Thales is to participate in Tokenized Positional Markets or Tokenized Ranged Markets, which essentially is a way to bet on the price action of different crypto assets.
In order to score profits with Thales, users should have a general understanding of the market movement. The amount of risk is adjustable by the user. With higher risk come higher rewards, but in case the bet doesn't pay off users can quantify the risks before opening their position.
In order to get started, users should have an Ethereum wallet like MetaMask, some ETH to pay the gas fees and have their funds bridged to Optimism.
Tokenized Positional Markets
If you are looking for a way to bet on the market movements, then Tokenized markets on Thales is the perfect place to be.
Here's how you trade on Thales:
Open the Thales app
Select the market of your choice
Select your bet (UP or DOWN)
Input the amount of tokens you want to buy/sell
Deposit and approve the transaction
Thales Staking
The Thales staking contract allows users to lock THALES tokens to receive voting power in the protocol.
Thales uses a Gamified Staking model to reward protocol users for certain activities, such as generating volume or staking SNX tokens. To incentivize staking, total THALES staking rewards for L2 Optimism stakers are 90,000 THALES tokens weekly. 60,000 THALES tokens are distributed as base rewards for staking, while an additional 30,000 THALES tokens going out as bonus rewards.
Every THALES staker has the opportunity to acquire an additional 50% of their staking rewards as bonus rewards based on their activity across Thales products and as an SNX staker. Stakers become eligible for these bonus rewards by staking SNX and from Protocol usage by generating volume from Thales AMM markets and Ranged Markets, as well as Overtime AMM Markets.
Here's how you stake THALES tokens:
Open the Thales app
Navigate to the "Thales Token" tab
Input the amount of THALES you choose to stake
Click "Stake"
Approve the transaction
Thales AMM
A prerequisite for providing liquidity to the Thales AMM is to have staked the THALES token. By providing liquidity to the Thales AMM, participants gain exposure to the AMM's performance.
Every THALES token staker will have a capped allowance on how much they can LP based on the amount of THALES token they are staking.
Liquidity providing will be done in weekly rounds with deposits allowed until a round starts. The round start times are chosen to fit well with the market creation/resolution. Users that have deposited in a round, can choose to exit at the rounds end by signaling a withdrawal during the round and then withdrawing.
A single market can only belong to 1 round, which is defined based on the maturity date of the market. When a round ends, the profit and loss (PnL) from all markets in a round is summed up, and allocated correctly to all liquidity providers.
Any round after round 1 will have all of the deposits + profits from previous round plus any new deposits at round start.
Let's explain how the system works with an example:
Users deposit $100k for round 1 and then the round is started Round 1 starts at 8th of November with $100k. If you provided $1000 your share is 1%.
Round 2 receives $20k of new deposits.
Round 1 ends with a total of 110k in the AMM. Your balance is now $1100 entering round 2.
Total in round 2 at the start is $130k. Your share is 1100*100/130000 = 0.84615%
Here's how you provide liquidity on the Thales AMM:
Open Thales app
Navigate to the Liquidity Pool page
Enter the amount of USD you wish to DEPOSIT
Approve USD by clicking APPROVE
Click on Deposit toggle, enter the amount of USD you'd like to deposit and confirm the transaction
The time until the current round ends is listed on the left. Once the round ends any deposits made during the previous round will be added to the AMM. Once you've made a pending deposit for the next round, the amount to deposit will be listed as "Next round balance".
