The paid membership service “Simetri” launched by Crypto Briefing, a crypto-asset research organization, released a report stating that Hegic may promote decentralized options trading to the next level and become the Uniswap in options trading.
Extended reading: ” Options or another breakthrough in DeFi, Opyn or Hegic may be the next rising star “
Author: Crypto Briefing, Encrypted Asset Research Institute Compiler: Perry Wang
Hegic has the potential to promote decentralized options trading to the next level and become one of the most popular DeFi platforms in the market.
HEGIC tokens can be purchased from multiple cryptocurrency exchanges, all of which can be seen here. Users who are interested in buying HEGIC are recommended to buy on the decentralized exchange DEX Uniswap. The exchange is one of the most reputable exchanges in the market and currently provides HEGIC with the best liquidity.
Briefly understand
- Token name: HEGIC
- Current price: $0.216
- Market value: $27,360,840
- Highest price in history: $0.350000
Financing information
- Early contributor quota 602,402,000 HEGIC
- Early contributors buy price $0.0027 Help
market data
- Circulation: ~130,000,000 HEGIC
- Total supply: 3,012,009,888 HEGIC
- Proportion of the top 10 currency holding addresses: 96.99%
- ATH Price: $0.258533 (Sep 12, 2020)
- 30-day average price: $0.12099
- 24-hour transaction volume $3,024,829
- 30-day average transaction volume $1,524,416
This year we witnessed a phenomenal outbreak of DeFi. The total locked-in value TVL of each DeFi smart contract surged from USD 600 million at the beginning of the year to USD 10 billion in November.
DeFi solutions are rapidly covering multiple industries. Some sub-sectors have become more competitive because of some star projects, and some sub-sectors are unknown, there is no clear market leader, and no promising market potential is seen.
At first glance, decentralized players seem to have covered all the popular services of traditional finance.
With the emergence of Uniswap and many other agreements, the field of decentralized trading seems to be quite crowded, and the competition for market share is very fierce. There are several lending platforms with good public acceptance, such as AAVE and Compound. There is also a leader in synthetic asset trading-Synthetix.
However, a very important element is still missing: decentralized option trading.
In the traditional financial field, option trading is a market with a scale of trillions of dollars, which plays a vital role in the world economy. However, this market has just gained momentum in the encryption field.
Adhering to the characteristics of the encryption field as always, centralized exchanges occupy a leading position. In the past two years, the trading volume of Bitcoin and Ethereum options on centralized exchanges has increased significantly, with the scale increasing by more than 30 times, from USD 198 million in January 2019 to USD 6.4 billion in October 2020.
When it comes to decentralized companies in crypto option trading, there have been several attempts to replicate centralized platforms. So far these attempts have been mediocre. Early platforms lacked liquidity, were not user-friendly, and could not gain momentum in the market.
If the lack of a simple and easy-to-use user interface/user experience (UI/UX) is not an obstacle to DeFi degens (referring to technology-savvy crypto gamblers), then lack of transaction liquidity is still an important issue.
Bottom line: No liquidity means no option trading.
But sooner or later there will be a project that must solve all these problems and make mission-critical trading tools enter the market. It now appears that this project has finally appeared.
Hegic is an on-chain peer-to-peer P2P option trading protocol based on Ethereum. We believe that Hegic may promote decentralized options trading to a higher level and become the Uniswap in options trading.
What is Hegic, and why is it a revolutionary option trading?
There are always ambitious crypto projects looking to build a decentralized option trading protocol. In fact, it may be the only industry in DeFi that has not seen significant growth despite its importance.
There are several reasons for this phenomenon. Options are a more complex derivative instrument, so there are fewer traders. But this does not mean that there is no demand for options trading. The trading volume of centralized options has been on the rise, which means that actual demand exists.
Before Hegic launched its platform in October, some projects had already provided decentralized options trading functions.
Opyn is one of the earliest projects in this field. As a platform, it offers more options than Hegic and lower prices.
However, its order book structure makes it difficult to attract liquidity, which hinders its development. If no one is willing to take the risk on the other side and sell you these options, you cannot buy options.
To alleviate this situation, Hegic took a completely different approach. The idea is to first establish liquidity and then expand its feature set.
The team behind Hegic provides innovative settings for option trading. The project uses two-way liquidity pool contracts. Therefore, the liquidity provider LP can simply deposit their ETH or WBTC (Wrapped Bitcoin) and generate market-neutral income.
The ETH (or WBTC) allocated in this liquidity pool is used to automatically sell ETH (WBTC) call options and ETH (WBTC) put options at the same time.
According to the rules of the project, LP automatically earns premiums from selling call and put options in this way.
For example , Hegic explained:
“If the price of ETH rises, the premium from selling put options can make up for the potential loss of the currency’s own call options. If the price of ETH falls, the premium from selling long options can make up for the potential loss of currency PUT options.”
These incentives helped the project quickly start liquidity on its platform. In about one month of operation, TVL reached 43 million U.S. dollars.
In contrast, Opyn, which has been in operation since February this year, currently has a TVL of approximately US$2.5 million.
With deep liquidity and no need for an order book, Hegic has the potential to completely change the decentralized options trading market and become the Uniswap in options trading.
Smart Contract TVL | Source: DeBank
Competition and market potential
There is no doubt that options in DeFi will one day be as popular as option trading in traditional finance. Options are used for hedging and play a vital role in the world economy.
The same is true for the encryption and DeFi markets, which is also an excellent opportunity.
As described earlier, competition in the decentralized crypto options market is currently scarce. Just one month after its launch, Hegic surpassed all competition agreements and possessed the deepest liquidity in this segment.
However, centralized competitors, such as Deribit or CME Group, are still Hegic’s rivals. The two current transactions are much larger, and the number of traders involved is also much larger.
Deribit is the largest exchange for crypto options. It currently accounts for more than 80% of the total transaction volume.
However, we can refer to Deribit’s transaction volume to understand the market size Hegic can reach in the next few years.
The popularity of crypto options has increased tenfold in the past two years, and this is just the beginning.
Overall, the popularity of decentralized transactions has increased significantly this year. With the outbreak of the DeFi field, Uniswap’s transaction volume surpassed the daily transaction volume of Coinbase Pro.
The trend of DeFi and decentralization will only become stronger, especially as the regulatory agencies in the United States and China tighten supervision and frequently take actions against centralized cryptocurrency exchanges.
List a few recent news:
As the crypto market evolves, regulators (especially in the United States) will formulate stricter regulations on crypto transactions. Therefore, American traders, one of the world’s largest trading markets, will not be able to use centralized exchanges.
Due to the impact of the above-mentioned events, Deribit has announced that it will implement a KYC review for all traders before the end of 2020. Since the United States is one of the most heavily regulated countries in the world, all American crypto option traders can only say goodbye to this platform.
All these news are positive for Hegic without exception. These American traders will begin to explore decentralized options trading options, and Hegic may be their first choice.
The Hegic platform has multiple protections. In addition to being decentralized, it also has an anonymous behind-the-scenes team. Even if regulators try to shut down Hegic, they don’t know who to contact.
Considering all the above factors, Hegic has the excellent potential to shine in the crypto options market and become one of the most popular platforms.
Source: The Block Crypto
Out of control after starting
Only one month after it was put into operation, Hegic handed in excellent answers. The liquidity pool continues to grow, and the total locked value of smart contracts exceeds US$43 million.
However, the success factor of the platform depends not only on liquidity. Depends on use. Traders clearly make full use of these two elements.
In just one month, the trading volume of the platform exceeded 38 million U.S. dollars, a total of 620 LPs contributed liquidity, and 880 participated in options trading.
Considering the short history of the platform, the above results are impressive. If this rate of development continues to be maintained, the market size of Hegic and its tokens may surge.
Hegic WBTC liquidity pool statistics | Source: The Block Crypto
Hegic ETH liquidity pool statistics | Source: The Block Crypto
In addition, as Hegic strengthens collaboration with other well-known DeFi communities, the Hegic community continues to grow.
Recently, Andre Cronje, the founder of one of DeFi’s most popular decentralized applications, yEarn.Finance, (he is also one of the contributors to Crypto Briefing) endorsed the work of the Hegic platform and its founder Molly Wintermute .
Cronje is one of the most well-known and respected developers in the DeFi field. His endorsement is extremely valuable and has stimulated demand and interest in Hegic.
Source: Twitter
Wintermute and Cronje will collaborate to create products that will benefit both platforms. yEarn’s strategic partners will use Hegic to introduce more stablecoins, cushion the risk of falling assets, and make full use of binary options. For Hegic, this means that there will be a higher transaction volume.
These two projects will also organize a DeFi fund to help hardcore developers and encourage them to build products based on the Hegic and yEarn.Finance agreements.
In addition, the project recently announced a collaboration with insurance provider Nexus Mutual. Users can now insure their Hegic WBTC and ETH liquidity pool insurance contracts. If these assets are hacked, users can get part of the damage compensation.
In the near future, Hegic will achieve more integrations. The project has an ambitious development roadmap and plans to rapidly develop the use of the platform through improved practicality.
Source: Twitter
The huge impact of token economics
This article published by Hegic on Medium explains Hegic’s token economics. However, we want to explain the main points that investors may be concerned about.
The total supply of Hegic tokens is 3,012,009,888 pieces. According to the team, the current circulation is about 120 million HEGICs. Within two to three years, all tokens will be unlocked, which means that the inflation rate during this period is high.
At the current price (US$0.18 per HEGIC), the fully diluted market valuation is US$574,925,355, which is a relatively high number for crypto projects. And this project may be one of the few projects where the fully diluted market valuation has little effect on the token valuation.
This is because of Hegic’s “Pledge Parking Space” system.
Simply put, Hegic allocates 1% of each option to the owner of Hegic pledged parking space. There are no more than 3000 pledged parking spaces, each of which contains 888,000 HEGIC tokens. These pledged parking spaces represent 88.5% of the total supply of tokens.
By buying and staking Hegic, investors not only have the opportunity to profit from the appreciation of the token, but also can share the pledge reward equivalent to 1% of the transaction volume in proportion.
In other words, Hegic also provides dividend income based on the use of the platform.
For example, if you have a pledge location, that is, 1/3000 of the 3000 pledged parking spaces, you will share 0.033% of the total handling fee.
HEGIC Token Distribution | Source: medium.com
If your financial resources are not enough to buy a pledged parking space, you can pledge Hegic through a third party.
The third-party pledge allows participants to participate in the pledge without holding 880,000 HEGICs (currently valued at US$186,900).
The current circulating supply of HEGIC is approximately 120 million. There are currently 100 pledged parking spaces, and 88.8 million HEGIC tokens are pledged, accounting for approximately 74% of the current circulation.
Since the launch of the agreement, the owners of the above 100 pledged parking spaces have earned approximately US$400,000, which means that each pledged parking space has earned approximately US$4,000 in one month. If the above conditions remain unchanged, its annualized return is about 25.7%.
For example, if Hegic’s monthly transaction volume is close to Deribit (monthly transaction volume is US$4 billion), its monthly transaction fee income is approximately US$40 million, or US$13,300 per pledged parking space (assuming that it has 3000 pledged parking spaces), with an annual income of approximately US$159,000.
As more and more HEGIC tokens are released into the market, there will be more pledged parking spaces. The transaction volume may continue to grow, and the income of each pledged parking space will also increase.
Option trading has begun to rise recently, and trading volume is expected to continue to rise. The ever-increasing transaction volume will bring higher transaction fee income and promote the appreciation of the token.
Source: Hegic team
Hegic risk
This year is also a year when DeFi has been constantly hacked, so investors must be cautious when investing in the DeFi field.
Investors should also keep in mind that Hegic is currently still in a highly experimental stage. It is only a beta version and may still be very vulnerable in the face of various hacking attacks and smart contract vulnerability attacks.
Hegic was initially launched in February 2020. After the 1.0 mainnet was released, a loophole was discovered and the wrong contract permanently locked the $47,765 asset.
Although the team reimbursed 100% of the lost assets, this shows that there is always the possibility of problems with the agreement.
Disclaimer: If you plan to use Hegic staking pool or zLots to pledge HEGIC, please take the responsibility. These smart contracts have not been audited. In addition, the founder of the Hegic project is anonymous, which brings additional risks. Investors can never be sure that the founder will have an accident. For anonymous founders, it is entirely possible that they will take away money from the smart contract and disappear, which will lead to your investment loss. Considering all factors, DeFi is still a high-risk area. The risk of losing all the money is always there. So don’t invest more than you can afford to lose. On the other hand, the encryption industry shows great growth potential.
to sum up
Overall, Hegic is like an aggressive option trading DeFi platform. It has brought the strongest liquidity in this market segment, with abundant transaction volume and development momentum.
As the transaction volume continues to rise, HEGIC pledgers may continue to make good returns. This may have a positive impact on the valuation of the project.
This project has the opportunity to become the Uniswap of the crypto option market, and option trading is one of the indispensable financial primitives in the DeFi field. But as we mentioned earlier, high returns mean high risks. The investment in this project has the possibility of losing money, so please consider carefully when investing.
Information disclosure: The author of this report holds BTC, ETH, and HEGIC. At least one member of the Crypto Briefing management team holds HEGIC. This company (Decentral media. Inc) holds HEGIC.
