What is Squeeth?

Squeeth (squared ETH) is a new financial derivative invented by the Research Team at Opyn (Zubin Koticha, Andrew Leone, Alexis Gauba, Aparna Krishnan), Dave White, and Dan Robinson. Squeeth is the first Power Perpetual and gives traders perpetual exposure to ETH².

Mechanism-wise, Squeeth functions similar to a perpetual swap, tracking the index of ETH² rather than ETH. It provides global options-like exposure (pure convexity, pure gamma) without the need for either strikes or expiries, effectively consolidating much of the options market liquidity into a single ERC20 token.

In short, Squeeth makes options perpetual and is a very effective hedge for Uniswap LPs, all ETH/USD options, and anything that has a curved payoff.

Different Ways To Squeeth:

Long Squeeth (Buy ETH² Position)

• Long Squeeth is a leveraged position with unlimited ETH² upside, protected downside, and no liquidations. Long Squeeth offers pure convexity (ETH² payoff), giving it a more favorable payoff than 2x leverage. Compared to a 2x leveraged position, Squeeth will make more when ETH goes up and lose less when ETH goes down, but funding rates are expected to be higher due to exposure to pure convexity. Long Squeeth holders pay a funding rate for this position.
• Squeeth gives buyers an ETH² payoff. It is similar to always holding an at the money call option - Squeeth buyers have constant gamma exposure.
• Long Squeeth holders pay a funding rate for this position, and enter the position by purchasing an ERC20 token.

Short Squeeth (Sell ETH² Position)

• Short Squeeth is a short ETH² position, collateralized with ETH. Traders earn a funding rate for taking on this position, paid by long Squeeth holders. Short Squeeth positions can be liquidated. A user’s exposure to the price of ETH depends on the amount of collateral they have deposited, as well as if they own the collateral or have borrowed it with stablecoins elsewhere.
• If you short Squeeth, you hold a position similar to always selling an at the money straddle, where you have constant negative gamma exposure. This functions exactly like a perpetual swap, where you target ETH² rather than ETH.
• Traders enter the position by putting down ETH collateral, minting, and selling Squeeth. If the short Squeeth position becomes undercollateralized, it could be partially or fully liquidated.

Compared to options, Squeeth has several key advantages:

• No strikes, no expiries
• No liquidity fragmentation
• No need to “roll” positions, avoiding risks and costs such as gas and spreads paid to market makers
• Constant gamma (curvature of payoff)

Compared to perpetual swaps, Squeeth has several key advantages:

• No liquidations on the long side
• Compared to a 2x leveraged position, Squeeth will make more when ETH goes up and lose less when ETH goes down (funding rates for Squeeth are expected to be higher due to exposure to pure convexity)
• The main difference between Squeeth and perpetual protocols is that Squeeth is a leveraged position (ETH² payoff) that is a fungible ERC20 token, enabling it to be traded separately (in uniswap pools, for example, or as collateral for loans). This composability is a major advantage to Squeeth’s design

Users send ETH to the contract then either mint W power perp or they then burn it and withdraw their ETH so I think to find the TVL we should look at the ETH deposits to the controller contract

I used the contract to find the pools of the oSQTH token and in the following chart you can find TVL of each pool

Using the Price of Squeeth as a Volatility Oracle

• The price of Squeeth can be used as a volatility oracle; a predictor of how much volatility we expect in ETH over the short term. Using the price of Squeeth as a volatility oracle is more effective than any on-chain oracle for ETH volatility because it is directly tradable, and better than any individual option because it is not specific to a particular strike or expiry.

Conclusion

In this dashboard I tried to find TVL in the Opyn Squeeth contract by finding total amount of ETH transferred to the controller contract and tried to suggest some ways that the oSQTH draw its value from.

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