Today we’re launching a new frontier for DeFi: Decentralized options trading. It’s Uniswap meets RobinHood.
Unless you’ve been living under a rock for the past few weeks, you’ve taken in the mayhem surrounding GME and RobinHood. Three weeks ago, retail investors were able to impact the world of options trading like never before, mainly through the Robinhood app, and take on overly aggressive short-sellers who bit off more than they could chew. It was the little guy taking on Goliath.
Fast forward three weeks and thousands of pissed off traders were locked out of their positions and banned from trading on the open market, while hedge funds shook down their brokers by calling in billions of collateral and getting off the hook. As the big guy won again, we all felt it — the game was rigged.
For anyone building DeFi products, watching the helplessness of traders over that period was painful. Once again, we saw big money beat small money. We saw a game where Goliath gave David a sling, then took it away when he got too close. It wasn’t right, and someone needed to do something about it. Introducing… Hedgey.
What is Hedgey?
On the surface, Hedgey is options trading without brokers, hedge funds, or banks. Under the hood, it’s a breakthrough decentralized financial derivatives (DeFiDe) protocol powered by Uniswaps liquidity, oracles, and flash swaps. It lets any Ethereum community self-launch a derivatives market for its token, as well as anyone with Metamask to buy, sell, and launch options contracts through a non-custodial smart contract.
Hedgey was built to feel like a centralized options platform while providing a completely non-custodial experience. Our flash swaps integration cuts out the need for brokers, as anyone can cash-close positions without owning the underlying capital. (In human talk, this means you can trade options without being a whale.)
Additionally, the ability to self-make markets allows the protocol to grow organically as communities expand their trading tools and integrate options trading.
A few examples of how traders and crypto projects can use Hedgey:
- Liquidity Hedgers: Any early liquidity provider can tell you how much they’ve lost from impermanent loss on mooning coins. Buyings calls on a project lets you provide liquidity AND catch the upside if a coin moons — all without having to buy more tokens.
- Bag Holders: We’ve all held bags longer than we should. Buying puts lets you protect your heavy positions if the price falls. Puts go up when prices go down.
- Moon Shooters: One of the most unique aspects of options is the ability to take heavier positions than you can purchase outright. Think a token is making a jump? Use calls to get more upside than buying tokens outright.
- Dip buyers: Waiting to enter on a dip is painful. Instead of buying a dip through limit orders, sell a put and make a premium to buy the dip. If the price drops, you make money and buy a dip. If your token doesn’t dip, you keep the premium and your capital.
- DeFi Speculators: Launching financial derivatives into the DeFi space creates a new layer of trading with a completely new layer of incoming capital. In addition to trading Ethereum tokens, speculators can now trade derivatives on those tokens.
- Project Founders: Launching a project in today’s market takes trust. Instead of locking vested tokens in a stagnate smart contract, sell them as long dated calls with milestone-based, moon-level prices. Community members can buy moonshots on their favorite projects without fearing a rug pull, while the founding team is able to gain short term capital from premiums. When the price matures, and the calls are sold in the money, the community and project hit a moonshot together. We call this the Hedgey Initial Options Offering (IOO) and Options Offering (OO). We think it’s the future of building trust between a project and it’s community.
Why we NEED DeFi derivatives in crypto
For decades, traditional markets have leveraged financial derivatives to extend the capacity of their assets. Beyond centralized platforms, retail traders haven’t had true access to a true world of financial derivatives. Even in the world DeFi we’ve been beholden to our Goliaths.
Over the next decade, the DeFi space will uncover new and powerful ways where these decentralized financial tools unlock potential old finance models can’t dream of. With the launch of Hedgey, for example, any project can join the world of derivatives, as can any trader. With Hedgey, traders get access to a fully functional FD platform without the need of banks, brokers, or hedge funds.
As the future of money evolves, so does the future of derivatives. We need DeFi derivatives now because we need platforms that let the little guy be the big guy, the bank, the broker, and the hedge fund. We’re launching Hedgey to start the conversation on how the future of finance evolves, and we welcome you to join us.
How we’re launching
Today, we’re launching Hedgey.finance along with our alpha smart contract interface, bug bounty, and open call for audits. We’ll be spending 02/12/21–03/12/21 with the site in sandbox mode with live contracts. Anyone is welcome to add, buy, sell, and create contracts through 3/12/21, but should do so with full knowledge of the risks in using an unaudited smart contract. During this month, the app interface will be bare-bones with an emphasis on allowing users to connect their Metamask to the smart contract and use functions in the contract.
Over the course of this month, we’ll be pushing the community to take advantage of bug bounties, updating bug fixes, deploying our completed front-end UI & UX, and finalizing audits before launching the full Hedgey V1 Decentralized Financial Derivatives Protocol.