Hegic

Hegic (HEGIC) is a decentralized options trading protocol built on the Ethereum blockchain. It was founded in January 2020 by an unknown developer using the pseudonym Molly Winterminute. The protocol aims to democratize options trading by providing a transparent, customizable, and secure platform for users to engage in options trading without intermediaries.

Hegic leverages smart contracts to execute options contracts, offering both call and put options for assets like ETH and wBTC. The protocol relies on a liquidity pool mechanism, where liquidity providers deposit funds to facilitate trustless options trading and earn rewards. The native token, HEGIC, plays a crucial role in the ecosystem, allowing holders to participate in governance decisions and stake their tokens to earn rewards for providing liquidity.

Hegic's innovative approach to derivatives incorporates decentralized finance (DeFi) logic into crypto options trading, offering functionalities beyond traditional financial derivative products. The platform seeks to provide transparency, trustlessness, and on-chain settlement to the world of crypto options trading, with plans to expand its offerings to various assets in the Ethereum ecosystem and further refine its hedge contract capabilities.

Hegic (HEGIC) is a decentralized options trading protocol built on Ethereum, allowing users to buy and sell put and call options for assets like ETH and WBTC. Here's how it works:

• Non-custodial: Hegic operates without a central authority, ensuring that users maintain full control over their funds.
• Verified on-chain settlement: All option contracts are settled directly on the blockchain, ensuring transparency and security.
• Customizable strike prices and exercise times: Users can choose their preferred strike prices and exercise options at any time during the contract period.
• Censorship-resistant: No KYC or email registration is required, making it accessible globally.
• Mobile compatibility: Users can trade on the go using WalletConnect.

• Call writers: Provide ETH to the liquidity pool and earn an estimated 29% annual percentage yield (APY). They receive writeETH tokens, which can be converted back to ETH.
• Put writers: Provide DAI to the liquidity pool and earn an estimated 29% APY. They receive writeDAI tokens, which can be converted back to DAI.

• Buying options: Users can buy call or put options for ETH or WBTC, giving them the right to buy or sell the asset at a specific strike price.
• Selling options: Liquidity providers sell options and earn premiums from buyers. The value of their write tokens increases when a buyer pays a premium but decreases when a buyer exercises a contract.

• Fixed supply: There are 3,012,009 HEGIC tokens, which will be unlocked over time as the protocol reaches specific goals.
• Uses: The HEGIC token is used for staking, governance, and distributing settlement fees among token holders. It also provides discounts for holders and priority unlocks for writers.

• Smart contract audit: After an initial bug was discovered, a new smart contract was released, and all users were reimbursed for lost funds.
• Community support: Hegic has a loyal community that supports its development and security.

• On-chain governance: HEGIC token holders can vote on proposals to change hedge contract rates, settlement fees, and more.
• Trading platforms: Hegic tokens can be purchased and traded on various cryptocurrency platforms.

Overall, Hegic offers a decentralized and secure platform for options trading, providing users with flexibility and control over their investments.

The token Hegic (HEGIC) has several strengths that contribute to its value and utility within the Hegic Protocol ecosystem:

1. Governance and Voting: HEGIC token holders can participate in the governance of the Hegic Protocol, allowing them to have a say in the direction and development of the platform.

2. Reward Distribution: HEGIC is used to distribute rewards to liquidity providers and option holders, aligning the interests of token holders and users. This incentivizes participation and liquidity provision within the platform.

3. Staking and Fee Collection: By staking a minimum of 880,000 HEGIC, token holders can claim staking lots, which make them eligible to receive a proportion of Hegic’s settlement fees denominated in ETH and wBTC, distributed quarterly.

4. Discounts and Priority: HEGIC token holders receive a 30% discount when purchasing hedge contracts on the Hegic platform. Additionally, hedge contract writers who hold sufficient HEGIC tokens are eligible for priority unlocks of their liquidity.

5. Liquidity Provision: HEGIC is earned by liquidity providers in addition to premiums paid in ETH and wBTC, providing an extra incentive for liquidity provision.

6. Fixed Supply: The total supply of HEGIC is capped at approximately 3 billion, ensuring that the token's value is not diluted by excessive supply.

These strengths collectively enhance the value proposition of HEGIC, making it a crucial component of the Hegic Protocol's operations and a potentially attractive investment opportunity.

Hegic (HEGIC) is an on-chain options trading protocol that operates on Arbitrum, focusing on simplifying complex financial instruments and providing users with a platform to manage risk and generate yield. The protocol uses a "stake and cover" liquidity model, where liquidity providers pool their assets to reduce downside risk and offer deep liquidity to buyers of hedge contracts.

1. Downside Risk for Liquidity Providers:

   • Hegic's liquidity pool mechanism distributes the downside risk among all liquidity providers. This means that if a hedge contract expires unfavorably, the losses are shared among all providers, reducing the risk for individual writers.

2. Risk of Capital Exposure:

   • In traditional options trading, individual holders and writers are exposed to independent risks and returns. Hegic's non-custodial liquidity pools mitigate this risk by pooling assets from multiple providers, making capital work more efficiently.

3. Settlement Fee Risks:

• Hegic distributes 100% of its settlement fees to HEGIC token holders. This means that token holders are exposed to the risk of reduced fees if the platform's trading volume decreases.

4. Smart Contract Risks:

   • Hegic has faced issues with smart contract bugs in the past, which can lead to the loss of user funds. Although the platform has since addressed these issues, the risk of future bugs remains.

5. Market Volatility:

   • As an options trading platform, Hegic is inherently tied to market volatility. Significant price swings can impact the value of hedge contracts and the overall liquidity pool, posing risks to both buyers and writers.

6. Liquidity Risks:

• Hegic relies on a sufficient number of liquidity providers to maintain deep liquidity. If liquidity providers withdraw their assets, the platform's ability to facilitate trades may be compromised.

Hegic's design aims to mitigate these risks through several mechanisms:

• Diversification: Liquidity providers can allocate funds to multiple hedge contracts, reducing their exposure to individual contract risks.
• Non-Custodial Pools: Hegic's liquidity pools are non-custodial, ensuring that no single entity controls the funds, and writers' assets are protected.
• Dynamic Strike Price: Hegic's dynamic strike price determination approach helps to manage the rate and premium of hedge contracts, reducing the impact of market volatility.
• Token Rewards: HEGIC token holders receive rewards in the form of settlement fees and bonding curve fees, incentivizing them to participate in the platform and maintain liquidity.

Overall, Hegic's financial risks are managed through its unique liquidity pool mechanism, diversification strategies, and token rewards. However, the platform remains exposed to market volatility and smart contract risks, which must be carefully monitored and addressed.

• Molly Wintermute: The sole developer behind Hegic, known by the pseudonym Molly Wintermute, who founded the project in January 2020.