Lyra x Sherlock: Avalon on Lock
June 30th, 2022

Sherlock is excited to announce its long-awaited partnership with Lyra to write $10M of smart contract coverage directly behind Sherlock’s audit of Lyra’s latest Avalon release.

This coverage will provide recourse for users of Lyra’s Avalon platform based on their pro-rata share of Lyra’s TVL.

Sherlock is a risk management platform built to help protect crypto end-users by uniquely aligning incentives with protocol teams by auditing their smart contracts and providing recourse through smart contract and bug bounty coverage in the event of an exploit.

Lyra is an open protocol for trading options built on Ethereum, allowing traders to buy and sell options that are accurately priced with the first market-based, skew adjusted pricing model. Lyra also quantifies the risks incurred by liquidity providers and actively hedges them, encouraging more liquidity to enter the protocol.

Sherlock x Lyra Security Partnership

The Lyra team has worked closely with Sherlock in recent months to prioritize secure development first and foremost in an effort to bring Lyra’s customers a trustworthy experience. Sherlock has provided Lyra with a complete audit of their Avalon contracts, allowing them to launch with $10M of smart contract coverage and a $1M bug bounty hosted through Immunefi, which is fully paid for by Sherlock.

Sherlock’s coverage-backed audit approach aligns incentives by matching Sherlock’s exposure to exploit risks faced by Lyra’s users. This stake in Lyra’s future puts Sherlock in a unique position to continuously work with the protocol team on future upgrades to their options markets for secure deployment, allowing the Lyra team to focus on their primary mission - creating a robust and innovative options market in DeFi.

The steps taken to secure Lyra’s Avalon release include:

  • Audits from Sherlock, Halborn, and Iosiro + fix reviews to ensure proper implementation of updates
  • $1M Immunefi bug bounty provided by Sherlock
  • $10M in smart contract coverage at launch Continued collaboration with Sherlock during the development cycle to review updates and maintain coverage
  • Development best practices in test coverage, peer reviews, and code complexity

Lyra’s Avalon Upgrade and a New Approach to Options Markets

Lyra Avalon builds off the foundation established in their V1 (Two-sided options markets, unified liquidity, composable delta hedging) with a suite of new enhanced features to offer an innovative options trading experiences. Lyra’s release focused on delivering a robust, efficient, and accessible options trading experience combined with predictable, programmable, 24/6 options liquidity. Enhancing both sides of the market leads to more fees for LPs, driving greater AMM liquidity, and ultimately offering a better venue for traders.

The core of the Avalon updates focused on four primary upgrades:

1. Anytime Entry / Exit for LPs

LPs can enter and exit Lyra market maker vaults (formerly known as market pools) at any time subject to a 7-day delay. This improves the liquidity provision experience, providing flexibility for users to reallocate liquidity across different markets and begin earning rewards immediately.

2. 12-Week Rolling Expiries

Avalon now supports options trading out to 3 months of expiries, with new listings being added continuously. Listings are planned to start slow as liquidity enters the system, but will eventually support over 100+ strike and expiry combinations.

3. Partial Collateralization

Partially collateralized options selling allows traders to sell 4-5x as many options with a given amount of capital relative to the Lyra V1. This allows for capital efficient arbitrage and provides liquidation fees to LPs in the market maker vaults.

4. Universal Closing

Users can now close positions regardless of delta or time to expiry. With a small closing fee, traders can close very in the money (ITM) longs (to cash in profits) or out of the money (OTM) shorts (to free up collateral) at any time.

Keep up with Lyra:

Follow along on Twitter, Discord, and their Blog page

Read more about the Avalon Upgrade

Keep up with Sherlock:

Follow along and get involved on Twitter, Discord, and through our website

See how Sherlock works

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