How Kyte works

Kyte is a non-custodial, fully collateralised options market on Robinhood Chain, an Ethereum L2. It supports two products: covered calls and cash-secured puts. Every option is backed 100% at creation. There is no leverage, no margin and no liquidation.

Buyers receive an Option NFT (ERC-721) representing the right to exercise. The status of the protocol: core contracts are built and tested; nothing is deployed to a public network yet.

• Call seller locks ERC-20 tokens and sets strike (in ETH), expiry and premium. Receives the premium, plus the strike if exercised; otherwise the tokens are returned.
• Put seller locks the strike in WETH. Receives the premium, plus the tokens if exercised; otherwise the WETH is returned.
• Buyer pays the premium and receives the Option NFT, exercisable until expiry. The NFT can be transferred or sold.
• Staker of the planned Kyte token receives 30% of protocol fees in WETH.
• Anyone can call expire after expiry. This has no special power; it keeps the system moving.

createOffer          buy (before offer deadline)
  ──────────►  OPEN  ─────────────────────────►  FILLED ─┬─ exercise (now < expiry)  ─► EXERCISED
                 │                                        │
                 └─ cancelUnfilled (seller) ─► CANCELLED   └─ expire (now ≥ expiry)    ─► EXPIRED

Status only moves forward. Exercise requires the current time to be before expiry; expire requires it to be at or after expiry. The windows do not overlap, so both can never succeed.

When an offer is created the contract enforces:

• The token is listed and enabled (for puts, puts must also be enabled for that token).
• Amount is greater than zero.
• Strike is at or above the token's minimum strike.
• Premium is at least 0.0005 ETH.
• Expiry is between 1 hour and 90 days from now.
• The offer deadline is in the future and no later than expiry.
• Open plus filled exposure for the token stays within its cap. Up to 25 tokens can be listed.
• The seller has fewer than 200 open offers.
• The contract balance grows by exactly the amount sent (fee-on-transfer tokens are rejected).
• The market is not paused.

Buyers specify a maximum premium when buying, guarding against front-running changes.

• Create call: tokens move from seller to the call market.
• Create put: strike in WETH moves from seller to the put market.
• Buy: buyer pays premium; 97% to seller, 3% to fee vault. NFT minted to buyer.
• Exercise call: holder pays strike; 99.9% to seller, 0.1% to fee vault. Tokens move to holder.
• Exercise put: holder delivers tokens to seller; the market pays the holder the strike minus 0.1%, which goes to the fee vault.
• Expire or cancel: collateral returns to the seller.

All payouts are in WETH. An unwrap-to-ETH step is offered.

Alice locks 100,000 ZEPH (an example token), strike 5 ETH, premium 0.2 ETH, expiry 7 days.

• Bob buys: Alice receives 0.194 ETH; 0.006 ETH (3%) goes to the fee vault; Bob receives the Option NFT.
• Bob exercises on day 5: he pays 5 ETH; Alice receives 4.995 ETH; 0.005 ETH (0.1%) goes to the fee vault; Bob receives 100,000 ZEPH.
• If Bob does not exercise, anyone can call expire after day 7 and Alice gets her ZEPH back.

3% of the premium on buy; 0.1% of the strike on exercise. No other protocol fees. Network gas is separate. Fees are fixed per position at creation.

The fee vault splits fees once per 24-hour epoch: 30% to stakers of the planned Kyte token, 20% to on-chain buy-and-burn, 50% to protocol operations. Hard-coded ceilings: premium fee at most 10%, exercise fee at most 1%, stakers' share at least 20%.

• AssetRegistry: token whitelist (max 25), per-token cap and minimum strike, puts on or off.
• OptionNFT: ERC-721, one per filled option, with on-chain SVG and JSON metadata. Only the markets can mint and burn.
• CallMarket: covered calls; escrows tokens.
• PutMarket: cash-secured puts; escrows WETH.
• FeeVault: holds fees and splits them per epoch.
• Planned: StakingPool, BuybackBurner and a stateless Router for ETH wrapping and multicall.

Option ids encode the market: calls and puts use separate tag ranges, and the same id is used in the market, the NFT and every event.

A 48-hour timelock controlled by a 3-of-5 multisig can list tokens, set caps, fees, split, router and guardian, and unpause. A 2-of-3 guardian can pause new activity and disable tokens immediately, but cannot enable or unpause anything. Nobody can move collateral except to its seller or the option holder. See the Security page for the full model.

Built: registry, Option NFT, call market, put market and fee vault with 71 passing tests; deploy script tested on a local chain. Next: staking pool, buyback-and-burn, router; then testnet; then indexer and keeper; then two audits, a bug bounty, a testnet beta, and a mainnet start with 3 tokens and low caps. No contract addresses are published because nothing is deployed to a public network yet.

General and partnership enquiries: [email protected]. Product updates and launch announcements are published only on @useKyte on X. Security reports: email [email protected] or send a direct message on X.