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Overlay

A cryptocurrency that lets users long or short DeFi data streams.
Category
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Finance
Blockchain
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Ethereum
Currency
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OVL
Publisher
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Overlay Protocal Team
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What is Overlay?
Overlay is a protocol for trading nearly any data stream, long or short, with leverage, using price oracles and a native token (OVL).Traders enter positions by locking up OVL tokens in long or short positions on various data streams offered by the protocol.
Information
Type
Automated Market Maker
Blockchain
Ethereum
Currency
OVL
Platform
Windows, macOS
Publisher
Overlay Protocal Team
FAQ
Overlay Protocol is a decentralized platform built on Ethereum, and offers users the ability to build positions on a market or data stream without traditional counterparties (liquidity providers or market makers) taking the other side of the position. Ideally, the protocol will offer markets based on (i) price data feeds and (ii) non-manipulable & non-predictable data feeds.
Overlay aims to offer several types of markets, based on price data feeds and non-manipulable & non-predictable data feeds. These include:

non-traditional crypto markets such as markets letting users build positions on hash rate, gas, BTC difficulty, NFT floors, social tokens, yield rates, etc.
non-traditional markets such as e-sports & sports, sneaker prices, scalar social-political markets, nature and science markets, etc.
traditional crypto markets
And the list goes on
Users build positions against the entire protocol itself, or perhaps most tellingly: against every other OVL holder simultaneously. This enables Overlay markets to have deep liquidity without the need for liquidity providers or traditional swap-based counterparties (including market makers). To read more about how the protocol negates the potential OVL inflation risk from this mechanism, please refer to this write-up.
Users would be required to lock OVL as collateral to a position in an Overlay market. PnL is settled in OVL. OVL is minted by the protocol and sent to the user as PnL if a position is in profit; on the other hand, if the position is at a loss, locked OVL is burned (to the extent of the loss).
Perps are the most popular type of derivative contract in crypto markets. Perps allow a user to take a long or short position on an underlying asset without owning it, while either paying or receiving funding to carry on the position (depending on market conditions and the side a user is on).

Perps differ from traditional futures contracts in that there is no date of expiry/settlement or delivery of the underlying asset. Perp contracts keep rolling over in perpetuity till a user decides to close their position.

Typically, whitelisted assets are used as margin/collateral for these positions and users are allowed to take on leverage (sometimes up to a 100x). If the margin requirements fall below the minimum threshold, the collateral is liquidated.

Contracts on Overlay markets resemble perpetual future contracts in that there is no date of expiry (contracts can keep rolling over), and that there is no delivery of the underlying asset. However, there are some key features of contracts on Overlay markets that differ from traditional perps - these are discussed below.
If the open interest (OI) of long positions is greater than the OI of short positions on an Overlay market, short positions earn funding on that market. The opposite also holds true, if OI of shorts are greater than that of longs.
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