AlgoRai's options vaults shed 99.98% of peak deposits on Algorand

2026-08-19

defi · options · vaults · structured-products · discovery · web · algorand · updated

AlgoRai's options vaults shed 99.98% of peak deposits on Algorand

An upgrade banner that outlived the upgrade

AlgoRai Finance's app leads with what looks like a product announcement: 'We have updated the smart contracts for our vaults to V1.1. This update enables new security features, and goETH / goBTC vaults.' The announcement it links to is dated October 17, 2022, and by June 2024 the same wording was already pinned to the site. The protocol's headline notice has not changed in over two years — and for a reader scanning for news, that banner reads as a release. In fact it is a time capsule from a project that peaked and has since almost entirely unwound.

AlgoRai launched in mid-2022 as what it billed as the first decentralized options vault (DOV) protocol on Algorand. It automated a product class — options writing — that is normally the preserve of professional derivatives desks, attracted an institutional backer list, and at its high point held millions of dollars in user deposits. The arc from there to a four-digit [TVL](/glossary/total-value-locked "A key metric measuring the overall health of the DeFi ecosystem. It represents the total fiat value of all ALGO and ASAs currently deposited or 'locke") is the story worth telling.

What AlgoRai sells: packaged volatility

Users deposit a token — ALGO, wrapped Bitcoin or wrapped Ether — into a vault smart contract. Each week the vault sells options against those deposits to a small set of whitelisted market makers, and the premiums become the yield, automatically reinvested. A covered call works like this in plain terms: the vault owns ALGO and sells a buyer the right to purchase it at a preset strike price by Friday. If the market price stays below the strike at expiry, the seller keeps the premium and the coins; if it climbs above the strike, the coins are delivered at the strike price and the depositor misses the extra upside. Put-selling vaults run the mirror image, using deposited stablecoins as collateral and settling the difference in [stablecoin](/glossary/stablecoin "A cryptocurrency whose value is designed to stay stable, usually by being pegged 1:1 to a traditional currency like the US dollar (e.g. USDC) or, in H") if the underlying closes below the strike.

Two choices distinguish the design. Premiums are paid in the asset deposited rather than a quote currency — deposit ALGO, get paid in ALGO — which the project says avoids the impermanent loss (the value drift liquidity providers absorb when one pooled asset moves faster than another) built into common LP strategies. And the options are sold only to whitelisted market makers through a weekly auction, never to the public, so every contract has a known counterparty on the other side.

Backers and institutional rails

AlgoRai was built alongside Algo Foundry, a venture studio focused on the Algorand ecosystem, and closed a US$1.7M seed round in early 2023. The backer list combined ecosystem funds, market makers and a custodian:

Backer group	Real-World Implication
Algorand Foundation	Ecosystem backing at launch — and, later, the governance reward allocations that became the protocol's main user incentive
Arrington Capital, Borderless Capital	Algorand-focused venture funds; early capital and ecosystem credibility
GSR Markets, TDX Strategies	Crypto market makers — natural counterparties for the weekly option auctions
Arcane Group, BCW Group, Mozaik Capital, Optio Capital, Undercurrent Capital	Remaining participants in the seed round

Hex Trust, the licensed digital-asset custodian, followed its investment in April 2023 with a partnership to give institutional clients access to the vaults from custody accounts. CEO Edward Lashinski framed the tie-up as 'a reliable, sound investment process within an ultra secure environment', while Hex Trust's head of custody said institutions were 'increasingly looking for access to decentralized structured products as their trust in centralized and opaque digital asset services decreases'. The core contracts were audited by Kudelski Security; the report link in the docs, however, has since gone dead — an archived copy survives — one of several signs that the documentation was frozen years ago.

The weekly machine

The settlement and auction process runs on a fixed Friday clock in Singapore time. At 18:00 SGT a round opens and the vaults close to new deposits and withdrawals; the weekly auction runs, winning market makers pay their premiums to the operator, and the operator credits the vault. Options run until the next Friday at 16:00 SGT, when the settlement price is fixed. If an option expires out of the money, nothing further happens and the premium is distributed pro-rata to depositors. If it settles in the money, the vault pays the market maker the difference between the exercise-settlement price and the strike, multiplied by the vault's asset volume, and depositors absorb the loss; the team's docs put that outcome at under 5% of rounds. Withdrawals requested mid-round are queued until the next window opens.

Concept	Real-World Implication
Weekly batching	Deposits at a round's start join that week's strategy; mid-week deposits wait for the next round, and mid-round withdrawals only clear at Friday settlement — predictable, but capital is locked for up to a week
Strike-price selection	The vault sets strikes algorithmically to target risk-adjusted yield, so users need not watch markets — though a fast price move can still leave a suboptimal strike
In-kind premiums	Yield is paid in the same token deposited and reinvested automatically, compounding the depositor's balance — which the project contrasts with the impermanent-loss exposure of LP strategies
Settlement risk	If Friday's settlement price crosses the strike, the vault pays the market maker the difference; the rare round that does this converts premium income into a principal loss

Algorand's [Pure Proof-of-Stake](/glossary/pure-proof-of-stake-ppos "A consensus mechanism used by some blockchains to validate transactions and secure the network. Unlike traditional proof-of-work, it relies on validat") consensus, with roughly 2.8-second blocks that finalize in a single round and fees typically under 0.001 ALGO, makes that cadence practical: a dozen vaults settling at once still costs participants fractions of a cent, and no one waits on probabilistic confirmation.

The 2022 upgrade that never stopped being news

AlgoRai announced version 1.1 of its vault contracts on October 17, 2022, for the round starting that Friday, with goETH and goBTC vaults to follow the next week. goETH and goBTC are tokens issued by AlgoMint and bridgeable from both AlgoMint.io and Messina.one, letting Bitcoin and Ethereum holders run options strategies inside Algorand. Because Algorand applications are immutable, the upgrade could not modify the old contracts; the team instead paused deposits and rounds on the V1.0 vaults and asked depositors to withdraw and re-deposit into the new ones, arguing that an automatic migration would mean trusting a [multisig](/glossary/multisig "Short for multi-signature, a security setup where more than one private key is required to approve a transaction. A 3-of-5 multisig means any three of") or governance body to move user funds — an attack surface they chose to avoid. Funds that were not rolled over could be 'withdrawn anytime in the future', the announcement said.

That was the last substantive infrastructure news. The banner announcing it is still the site's lead notice, the docs' deployed-contracts page still enumerates only the two original ALGO vaults, and most documentation carries 'Last updated 3 years ago' stamps.

Rewards, governance, and the slow unwind

The fuel for growth was governance. Algorand governors voted to 'Boost' DeFi with Targeted DeFi Rewards, and AlgoRai received allocations it passed on to depositors: 123,969 ALGO for governance period 8, 556,790 for period 9 and 442,807 for period 10, with distribution plans published in the Algorand forum. The period-11 proposal failed at the ballot — 'The GP11 proposal vote did not go our way at AlgoRai', a team member wrote — and later proposals (12 through 14, the last in December 2024) aimed smaller. Today the rewards dashboard shows an all-time reward pool of 0 ALGO, current-period rewards of 0, and 0 ALGO distributed — a state already visible in archive captures from April 2026.

TVL drew a different curve. DeFiLlama's monthly figures show deposits climbing to a peak near US$6.4M in November 2024, holding above US$1M through mid-2025, then collapsing below US$25,000 by September 2025. A February 2026 jump to roughly US$1.35M proved to be a spike rather than a recovery — by April the total was back near US$16,000, and it now stands at US$1,419, about 0.02% of the peak.

Chart: AlgoRai Finance monthly TVL, Sep 2024 – Aug 2026 (DeFiLlama)

What's left running

The platform is not wound up; it is simply empty. [On-chain](/glossary/on-chain "Describes transactions that are recorded and permanently stored on a blockchain ledger, making them publicly visible and tamper-resistant.") records show application calls tied to the vault machinery as recently as June 9, 2026, and the settlement account at the center of the operation last transacted on July 26, 2026, holding about US$633 in USDC plus fractions of a goBTC and a goETH — dust consistent with a settlement engine that has nothing left to settle. An 'Ops Settlement' multisig requiring two of three approvals sits under the same operator, and the app's filters now span Algorand and EVM networks with Bear Yield and Bull Yield strategy types. The account that deployed the original vault contracts, meanwhile, holds about 64 ALGO, almost all of it committed as the account's minimum balance.

Public communication went quiet in step with deposits: weekly vault performance reports stopped in March 2024; the last community update, in September 2024, ran content and design campaigns with 10,000 ALGO reward pools; and the Discord invite is expired.

The arc is a reminder that on a chain where settlement is cheap and final, the scarce resource is not infrastructure — it is deposits. The vault design, with its weekly auctions and in-kind premiums, was a coherent answer to the operational burden of options trading, and governance subsidies demonstrably worked while they lasted. The contracts still execute today. Whether anything restores the deposits is now a question for the team that built them.

Source

Source: https://app.algorai.finance/?vaultIndex=27&strategy=Covered+Call