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Rorschach-DeFi
@ror-defi
DeFi is Broken | Part Two After discussing the flaws in DeFi lending and borrowing. Let's explore Hedging — The Risk Mitigator. What is hedging? Hedging is a strategy to protect an investor's investments from negative events by offsetting potential losses with gains in another related investment. Types of Hedges - Options: Utilize call and put options to cap potential losses in your investment portfolio. - Equity Swap: This method involves exchanging future cash flows to mitigate exposure to fluctuations in equity asset prices. Why is hedging crucial in DeFi? DeFi platforms offer options, futures, and swaps to safeguard investments against price volatility, aiding users in managing risk in the dynamic crypto markets.
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Rorschach-DeFi
@ror-defi
How does Xeon integrate hedging onchain? Xeon has its proprietary Xeon Hedging Model: A P2P or OTC approach where there's a writer and a taker for every deal, with the hedger writing the hedge while speculators take positions. We've devised custom pricing and trading structures to address the shortcomings of existing ERC-20 based hedges. Key Components: - Xeon Hedge NFT: Each position is represented as an NFT that securely holds tokens and settlement conditions on a per-position basis to ensure composability and reduce protocol risk. - Custom Terms: Hedge writers set the terms—from asset type and hedge style to the cost and duration of the deal. - No Systematic Limits: Tokens are utilized individually per deal, removing systematic restrictions on premiums or durations. But that’s not all- there are more features we provide: 1️⃣ Evolving Agreements: Xeon Hedging supports dynamic term adjustments in deals, including options and swaps.
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Rorschach-DeFi
@ror-defi
2️⃣ Automated Settlements: Deals are settled upon expiration by XEON stakers, with a 5% fee on profits returning to the staking pool 3️⃣ Capped Losses: - Settle hedges promptly at expiration to limit losses. - Stakers can also manually settle hedges for quick resolutions with mutual consent from both parties. 4️⃣ Dynamic Pacts: Parties can agree on adjusted terms through the lifecycle of a hedge. 4️⃣Unplug Requests: Increase a deal's premium before expiry with top-ups, or request to expedite settlement to the current date and time. 6️⃣Top-Ups: Parties can request an increase in the deal's premium before expiry. For more details on hedging, check out our - Hedging Part 1: https://medium.com/@xeonprotocol/neon-hedging-part-1-basics-of-hedging-6270d83ba2c1 - Hedging Part 2: https://medium.com/@xeonprotocol/neon-hedging-part-2-the-xeon-h-edge-e726fbde5412 One step closer to reDeFining DeFi 💯
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