Bitmex research has published an interesting article:
Here are my comments to the article:
- They made some mistakes when they descibed the trade protocol but for the option trade topic that is not relevant. E.g. there is only one atomic deposit tx where the funds of both traders (trade amount + security deposits of buyer and seller) go in. When a maker creates an offer no funds are locked up but only reserved for the trade in the makers wallet. See https://docs.bisq.network/exchange/images/trade-process-overview.png for the overview about the trade protocol.
- The offer-maker can set the required deposit for the buyer in between a certain range. That enables to define manually the risk exposure to option trades. To improve that with % based values is on our short term todo list. To add a more sophisticated solution with provided recommendations would be also possible but would require a bit more effort.
- The downside of the option trade can be seen as positive in form of a insurance against radical price changes. For one side it’s positive for the other negative but it gives a limitation of losses and gains due volatility. The security deposit of the buyer is the amount of the max. loss due volatility.
- Any user can block any other users onion address. A trader who engages multiple times in option trading risks to get blocked by the trade peers. Not a strong protection but something which seems to be widely used by Bisq users.
- To embrace the option trading model would not fit to Bisq’s primary user base and core mission: Privacy protecting exchange of Fiat with Bitcoin. The onboarding aspect is key here. For professional high volume traders the Bisq model as it is currently is not suited for various reasons. One obvious is the limitation of speed when it comes to on-chain trade protocols. There are some ideas for the future to provide solutions but that is nothing we are focussed on atm. Beside that I assume that many of our users do not know what an option trade is or how it works. They simply want to get into Bitcoin without losing their privacy.
- The arbitrator as the “judge” in option trade cases will get removed with the upcoming trade protocol. See https://github.com/bisq-network/proposals/issues/52 for more details. Will not have much relevance regarding option trading as the mediator will play a similar role as the arbitrator but he has not signing keys.