Crypto Gloss

Ribbon Finance

Ribbon Finance is a structured options yield protocol operating Theta Vaults — automated DeFi strategies that sell out-of-the-money options on a weekly basis to capture theta decay — offering users passive yield from options selling while professional market makers on the other side seek delta exposure through the vault’s option auctions.

Overview

Ribbon Finance launched in 2021 as one of the earliest structured options products in DeFi. Its Theta Vaults automate a covered call or cash-secured put strategy that traditional crypto holders could not easily execute: deposit ETH, receive weekly yield from selling call options just above the current ETH price. This allows ETH holders to earn income without selling their ETH (unless price moves above the strike at expiry, triggering a covered call). Ribbon raised $8.8M from investors including Paradigm, Dragonfly, and Coinbase Ventures.

Ribbon Finance later evolved into Aevo Exchange — a full-featured options DEX — rebranding in 2023 as the DOV model gave way to more sophisticated on-chain options trading infrastructure.

Theta Vaults

The following sections cover this in detail.

Covered Call Vault (ETH-C)

  • Users deposit ETH
  • Each Friday, vault sells weekly ETH call options (out-of-the-money, ~10-20% above spot)
  • Options sold via auction to professional market makers (Wintermute, QCP Capital)
  • If ETH expires below strike: vault keeps premium → user earns yield in ETH
  • If ETH expires above strike: vault delivers ETH at strike → user caps upside (covered call risk)

Cash-Secured Put Vault (ETH-P)

  • Users deposit USDC
  • Vault sells ETH put options (below current price) weekly
  • If ETH expires above strike: vault keeps premium → user earns yield in USDC
  • If ETH expires below strike: vault must buy ETH at strike → user takes on downside exposure

Available Vaults

Ribbon operated Theta Vaults for:

  • ETH (covered call and put)
  • BTC (covered call)
  • AVAX, SOL, APE, and other volatile assets
  • stETH-C (LSDfi-enhanced covered call — deposit stETH, earn staking yield + options premium)

Option Auctions via Gnosis Auction

Vault options were sold through weekly auctions:

  • Gnosis Auction batches bids from market makers
  • Market makers submit bids: willing to pay X premium for Y options
  • Gnosis processes in single-clearing-price mechanism
  • Ensures competitive pricing and transparent strike/premium discovery

RIBBON Token and DAO

  • RIBBON — governance token for Ribbon Finance DAO
  • veRBN — locked RIBBON for governance weight and protocol fee sharing
  • Fee: Ribbon charges 2% annual management fee + 10% performance fee on Theta Vault yield
  • DAO governs: vault parameters (delta, tenor, strike selection logic), product additions, treasury

Evolution to Aevo Exchange

In 2023, Ribbon Finance launched Aevo:

  • Aevo is a full L2 options exchange (off-chain orderbook, on-chain settlement)
  • Built on Aevo’s own OP Stack L2 rollup
  • Merged Ribbon’s DOV model with Aevo’s options DEX — DOV vaults now sell options via Aevo’s orderbook vs external market makers
  • Ribbon Finance rebranded to Aevo Exchange; RIBBON token was migrated to AEVO token

Sources

Related Terms