The Hegic V8888 version has great advantages in terms of transaction costs, automatic hedging to guarantee 20% of returns for low-risk option liquidity providers, automatic execution of real-value options, and competitive premiums.
Written by: Karen
This week, the on-chain option agreement Hegic launched another major version update-V8888 after 10 months. Since the release of the previous version of V888, the total transaction volume of the Hegic agreement has reached nearly 500 million U.S. dollars, and the highest single-day transaction volume has exceeded 22 million U.S. dollars, far exceeding other similar option agreements. The V8888 version has been optimized in terms of transaction costs, user experience, capital efficiency, and risk stratification, which is expected to further consolidate Hegic’s dominant position in the on-chain options track.
What are the features of Hegic V8888?
Hegic is an on-chain peer-to-pool option trading protocol that supports the trading of ETH and WBTC American options. That is to say, the liquidity provider acts as the option seller and earns the premium from the option buyer. At the same time, users also need to pay settlement fees to the HEGIC token pledger when purchasing options, and settlement fees are fixed at 1% of the option scale. Hegic uses the Chainlink oracle to determine the market price of the underlying asset, and then price the option according to the pricing formula including the exercise period, the exercise price, the price of the underlying asset, and the implied volatility factor. However, the current implied volatility The rate (IV) is manually fetched from Skew, and then it will be automated when Chainlink’s implied volatility oracle becomes available.
After testing by the chain and according to the official information provided by Hegic, the new version of Hegic mainly launched upgrades such as zero platform transaction fees, automatic hedging for low-risk option seller users to guarantee income, automatic execution of real-value options, and competitive premiums.
Low transaction costs: zero platform commission + competitive royalties
Hegic’s low transaction costs can be seen from three aspects: zero platform commission, royalties, and gas-free transactions. For option buyers, only the premium (USDC) needs to be paid to the option seller who provides liquidity, and Hegic does not charge commissions. In addition, unlike the V888 version of option buyers who need to pay an additional settlement fee (1% of the option size) to the token holder, the new version will also calculate the settlement fee on the premium.
Regarding 100% gas-free transactions, Hegic officially stated that it will use the Gas Station Network to reduce all gas fees (transaction fees) paid by users during option purchase and exercise. The initial 100% gas-free transactions are only applicable to options with a scale of 10 ETH Or transactions above 1 WBTC, and after a total of 10,000 options are traded in the new version, the applicable scale of gas-free transactions will be reduced to 5 ETH or 0.5 WBTC. However, after the test, it was found that all transactions currently require the payment of gas fees, and it is not clear what the official method of gas transaction reduction or exemption is.
Hegic also issued a benefit when its new version was launched. Users who have previously used Aave, Bancor, Compound, MakerDAO, SushiSwap, Synthetix, Uniswap, and yearn.finance products can have a free transaction size of 0.8888 ETH in August. For options with a term of 1 day, you can privately trust Hegic’s official Twitter to get a refund of the royalties and gas fees after the transaction.
In addition, Hegic provides a relatively competitive premium price. The official said, “The new version will adjust the implied volatility parameter to set the premium to be lower than the price of the centralized trading platform, and it will always be lower than Deribit.”
Option features: USDC payment + automatic execution + option tokenization
Hegic has also made a lot of optimizations in terms of user experience such as flexibility and simplicity. The most obvious is that for option buyers, whether it is WBTC or ETH options, USDC pays the premium, while option sellers sell put options. Liquidity is provided by USDC. Selling call options requires liquidity to be provided by the underlying asset.
In the old version, taking ETH options as an example, liquidity providers need to provide ETH as liquidity when selling call options, and DAI as liquidity when selling put options. Correspondingly, buyers of call options and put options The royalties shall be paid in ETH and DAI respectively.
In addition, unlike Opyn and other options, the options traded on Hegic are all American options, which means that option buyers can choose to exercise their options before expiration, or Hegic can automate them 30 minutes before expiration. Help exercise (in the case of real-value options).
In addition, the new version extends the maximum contract period from 28 days to 90 days. It also adds a sliding bar for estimated revenue on the trading page, and has also greatly optimized the visualization page for fee calculations, break-even prices, etc. . It is worth mentioning that Hegic presets the strike price in the new version. Although it simplifies the process of creating options, in this way, users cannot customize the creation of options with arbitrary strike prices.
Similar to most option agreements, the options purchased by users in Hegic will be tokenized into ERC-721 standard tokens that support transfers. Therefore, Hegic is preparing to launch trading services for options before expiration, and users who purchase options will be able to Sell its contract and obtain the time value of the option.
Option seller: automatic hedging + 2 times capital efficiency
From the perspective of option sellers that provide liquidity, as mentioned above, USDC provides liquidity for all put options sold, and liquidity is provided by the underlying asset to sell call options. The new version of Hegic pioneered the automatic hedging function for option liquidity providers, which is similar to risk grading, providing users who like low risk with a non-destructive protection of principal +20% of the premium, that is, after users check automatic hedging , Can always withdraw its full liquidity plus 20% of the net royalties distribution.
One more thing to note is that liquidity providers who choose automatic hedging need to lock their liquidity for 60 days, and other liquidity providers for 30 days.
Hegic also stated that the new version will set the mortgage rate in the range of 30% to 100%. Data on the chain shows that in the past 10 months, less than 1% of all real-value options (ITM) exercised on Hegic More than 50% of the initial collateral that needs to be locked in the option. The mortgage rate of Hegic V8888 will be set to 50% at the time of release, which may enable LP to obtain more than twice the premium as the trading options are doubled.
Token pledge: remove the pledge threshold
One of Hegic’s operating modes is that option buyers need to pay an additional 1% of their option size to holders of a large number of pledged tokens, and the new version also provides ordinary users with the opportunity to earn settlement fees.
In the old version of Hegic, the settlement fee paid by option buyers (1% of the option size, denominated in ETH or WBTC) will be all allocated to the HEGIC token staking lot (Staking Lot). One staking unit needs to pledge 888,000 HEGICs. Calculated at the current price of US$0.2, the value is more than US$177,000. Undoubtedly, the high threshold has largely restricted users’ desire to participate in staking.
The new version lowers the requirements for token pledge units and is divided into two types: Microlots and Staking Lot. Among them, Microlots has no limit on the number of pledges, but can only receive 20% of the total pledge reward. In addition, users can choose their own reward method among WETH, WBTC and USDC.
As of the time of writing, over 5.3 million HEGIC tokens have been pledged in Microlots, and the current number of Staking lots is 93, or 82.584 million tokens.
Summarize
In summary, the new version of Hegic has greatly improved transaction costs, user experience, risk hedging, and capital efficiency compared to its old version. It also opens up options for token holders who want to earn option transaction settlement fees. The original restriction of 888,000 tokens has also played a key role in driving its product transactions and token economy.
Compared with most other option agreements or centralized option products, it is also in American options, through automatic hedging to achieve risk stratification and guarantee 20% of returns for low-risk option sellers, option tokenization (subsequent open trading), option prices, etc. There are certain advantages in this regard. However, in the new version, it is not possible to customize the creation of arbitrary exercise prices, there are slippages in the trading process, and the implied volatility in option pricing needs to be manually captured. It is also worth pondering. At the same time, it is also urgent to explore expansion plans.
Disclaimer: As a blockchain information platform, the articles published on this site only represent the author’s personal views, and have nothing to do with the position of ChainNews. The information, opinions, etc. in the article are for reference only, and are not intended as or regarded as actual investment advice.
