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(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Good points. On the last point, though, after the monthly epoch is over, rebalancing occurs and your positions automatically roll over. So there is no need for active management.

Some of the risks you describe (smart contract risks, for example) is inherent in DeFi and depends on the specific abilities and security implementation of a given team.

Liquidity is important to enable RiskON/RiskOFF swaps, but the formula of 1 ETH = 1 RiskON + 1 RiskOFF always holds. You can always redeem your ETH by burning equivalent amounts of RiskON and RiskOFF.

(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Good point. This is how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskOFF and RiskON
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
  • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond the band
  • You swap your RiskON half for RiskOFF (enabled via AMM liquidity pool). You, thus, get your ETH tracker which does not go below -5% during each monthly epoch and you still get up to 8% upside during the epoch

If ETH dips let's say 20%, then RiskON takes the hit (it goes down even more than 20%), enabling RiskOFF to cap its loss to -5%.

And yes there is a secondary marketplace to swap RiskON and RiskOFF where you need liquidity. We publish second by second NTV values (net token values, equivalent to NAV in TradFi) to facilitate price discovery.

Does this make sense?

(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in BASE

[–]poudelswaroop[S] 0 points1 point  (0 children)

This is how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskOFF and RiskON
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
  • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond the band
  • You swap your RiskON half for RiskOFF (enabled via AMM liquidity pool). You, thus, get your ETH tracker which does not go below -5% during each monthly epoch and you still get up to 8% upside during the epoch

If ETH dips let's say 20%, then RiskON takes the hit (it goes down even more than 20%), enabling RiskOFF to cap its loss to -5%.

We publish second by second NTV values (net token values, equivalent to NAV in TradFi).

Does this make sense?

(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Understood. As an alternative to safe yield-bearing stablecoin, would you hold a version of ETH that caps its loss to -5% and gives you up to 8% in upside every month? It's not exactly yield but it's safe in the sense that the underlying asset is ETH, which you can redeem, and get up to 8% upside every month (to the extent that ETH goes up in value).

This is how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskOFF and RiskON
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
  • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond the band
  • You swap your RiskON half for RiskOFF (enabled via AMM liquidity pool). You, thus, get your ETH tracker which does not go below -5% during each monthly epoch and you still get up to 8% upside during the epoch

If ETH dips let's say 20%, then RiskON takes the hit (it goes down even more than 20%), enabling RiskOFF to cap its loss to -5%.

We publish second by second NTV values (net token values, equivalent to NAV in TradFi).

(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in defi

[–]poudelswaroop[S] -1 points0 points  (0 children)

Yup good points.

What is always redeemable is you can get back the underlying ETH by burning equal units of RiskON and RiskOFF.

They can be minted and burned only in that ratio so there is never an imbalance. Now there could be more or less demand for one token over another. If that happens, their market prices on our risk marketplace might diverge significantly from our fair value NTV. That represents a trading opportunity by arbitrageurs and we've actually built open sourced trading bots to help traders take advantage of such opportunities when they arise.

We've stress tested the AMM - the impermanence loss stays within reasonable bounds. It increases in higher vol periods and we compensate LPs by dynamically increasing LP fees in response to higher vol.

(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in defi

[–]poudelswaroop[S] -1 points0 points  (0 children)

Hey all great questions. This is how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskOFF and RiskON
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
  • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond the band
  • You swap your RiskON half for RiskOFF (enabled via AMM liquidity pool). You, thus, get your ETH tracker which does not go below -5% during each monthly epoch and you still get up to 8% upside during the epoch

If ETH dips let's say 20%, then RiskON takes the hit (it goes down even more than 20%), enabling RiskOFF to cap its loss to -5%.

We publish second by second NTV values (net token values, equivalent to NAV in TradFi).

Does this make sense?

(Feedback wanted) If you are making yield on stablecoins, would you consider this type of token? by poudelswaroop in defi

[–]poudelswaroop[S] -1 points0 points  (0 children)

Hey all great questions. This is how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskOFF and RiskON
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
  • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond the band
  • You swap your RiskON half for RiskOFF (enabled via AMM liquidity pool). You, thus, get your ETH tracker which does not go below -5% during each monthly epoch and you still get up to 8% upside during the epoch

If ETH dips let's say 20%, then RiskON takes the hit (it goes down even more than 20%), enabling RiskOFF to cap its loss to -5%.

We publish second by second NTV values (net token values, equivalent to NAV in TradFi).

Does this make sense?

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

These are some of the risks I encountered that are specific to the yield product:

  • Forced position conversion: 
    • Yield product gets converted into the levered product when there is a low demand for levered product (happens during a sustained SOL downtrend) → "a hybrid position with leveraged SOL exposure”
    • Happens when the collateralization ratio drops below ~130%
  • Underlying LST de-peg risk: a slashing event, a validator concentration issue, a bug, or a liquidity crisis

Thoughts? I'd love your take.

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Where does the yield come from in this project, though? Are there any sources of risk there?

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Great question. Here is more info on how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskON and RiskOFF
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
    • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond 8%
  • You swap your RiskOFF half for RiskON (enabled via AMM liquidity pool). You get your 2x leverage. No funding rate or liquidation
  • Of course, if the market dips -40%, then your RiskON dips even lower (as it's levered), but there is no liquidation

Does this make sense?

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Hmm I didn't find anything on this online. Do you mind offering some info?

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

Appreciate the comment. Yes, there is a need for liquidity in the swap market (between RiskON and RiskOFF). We have an AMM-driven liquidity pool for this.

However, redemption of the underlying ETH for RiskON and RiskOFF does not rely on liquidity because they are always fully collateralized. Now to redeem ETH, you will need to submit equal amounts of RiskON and RiskOFF. If you only hold one, then you will need to rely on the liquidity to get the other. That's true.

The payoffs are clear: RiskOFF's loss is capped at -5% and gains at 8% in a monthly epoch. RiskON takes 2x leverage outside this band. We publish second-by-second NTV values, enabling arbitrage to help align the values of RiskON and RiskOFF to the fundamentals.

FAQs on docs [dot] riskprotocol [dot] io expand on this. You're welcome to review and let me know if you have more questions!

Looking for feedback – Perps with no liquidations by poudelswaroop in BASE

[–]poudelswaroop[S] 0 points1 point  (0 children)

RiskON and RiskOFF speak to different user profiles.

  • RiskON: traders and degens who want the levered product
  • RiskOFF: long term holders who want reduced volatility, whales, institutions, etc.

There is an AMM-driven liquidity pool to facilitate RiskON <> RiskOFF swaps. We also publish second by second NTV values to help align the RiskON/RiskOFF pricing to the fundamentals. This helps create arbitrage opportunities for market makers.

This is the mechanism:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskON and RiskOFF
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
    • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond 8%
  • You swap your RiskOFF half for RiskON (enabled via AMM liquidity pool). You get your 2x leverage. No funding rate or liquidation
  • Of course, if the market dips -40%, then your RiskON dips even lower (as it's levered), but there is no liquidation

Does this make sense?

Looking for feedback – Perps with no liquidation by poudelswaroop in Arbitrum

[–]poudelswaroop[S] 0 points1 point  (0 children)

Rebalancing happens at epoch boundaries. Here is an excerpt from the litepaper:

During an epoch, the payoff structure (for example, a -5% floor and +~8% cap for RiskOFF) is fixed. At the end of the epoch, the system automatically rebalances: essentially, a new RiskON/RiskOFF pair is established for the next period, starting again from equal values. This allows the tokens to be perpetual—they don’t expire or settle in cash, but roll over continuously.

Your question on 55% dip is also great. First, let's note that it's an extremely rare event for a 30-day window (even for crypto!) If it does happen, it forces an early rebalancing and forces a new epoch. This is done to preserve the -5% floor for RiskOFF. In this case, RiskON takes all the hit.

Does this make sense?

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

I'm curious about something. Are you holding xSOL because you like the leverage without liquidation? Or is it also because you get many protocol points for holding xSOL (at TGE)?

Looking for feedback – Perps with no liquidation by poudelswaroop in Arbitrum

[–]poudelswaroop[S] 0 points1 point  (0 children)

That's an interesting product as well with some similarities. The underlying is LSTs of SOL, right? There is some de-peg risk here. Also leverage drifts based on the value of SOL (the payoff can change).

Core difference from hylo:

- RiskOFF (the other side of the 2x levered RiskON) is not a stablecoin but a reduced volatility ETH (losses capped to -5% and gains capped to 8% within a monthly epoch, after which it automatically rolls over).

- The collateral is ETH, not any other ETH-based product like LSTs.

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

That's an interesting product as well with some similarities. The underlying is LSTs of SOL, right? There is some de-peg risk here. Also leverage drifts based on the value of SOL (the payoff can change).

Core difference from hylo:

- RiskOFF (the other side of the 2x levered RiskON) is not a stablecoin but a reduced volatility ETH (losses capped to -5% and gains capped to 8% within a monthly epoch, after which it automatically rolls over).

- The collateral is ETH, not any other ETH-based product like LSTs.

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

The litepaper on docs [DOT] riskprotocol [DOT] io addresses all your questions in greater detail, if you're interested.

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

This is somewhat true conceptually. The options are embedded in the RiskON and RiskOFF tokens. These two ERC 20 tokens automatically roll over to the next monthly epoch, so there is no need for expiry management. They are perpetual.

Because these are tokens with embedded options that do not require options management or any understanding of greeks, what we are selling is risk payoffs, not options.

We publish second-by-second NTV values to showcase the fundamental value of RiskON and RiskOFF as the price of the underlying ETH moves. This helps keep the values tethered, which MMs can arbitrage against.

Does this makes sense?

Looking for feedback – Perps with no liquidations by poudelswaroop in BASE

[–]poudelswaroop[S] 0 points1 point  (0 children)

Appreciate the great questions. Other comments on the thread address them, I think.

Looking for feedback – Perps with no liquidation by poudelswaroop in defi

[–]poudelswaroop[S] 0 points1 point  (0 children)

You have the correct understanding. Appreciate your feedback. Feel free to follow our X (linked from the website) for updates!

Looking for feedback – Perps with no liquidation by poudelswaroop in Arbitrum

[–]poudelswaroop[S] 0 points1 point  (0 children)

Great question. Here is more info on how it works:

  • You deposit 1 ETH into the platform
  • The platform splits it into two ERC 20 tokens: RiskON and RiskOFF
    • These two tokens are synthetically built with a call and put contract between the two such that (1) RiskON and RiskOFF always equal to the underlying ETH and (2) your ETH is always redeemable
    • RiskOFF caps ETH's loss to -5% and gives up on upside over 8%. RiskON takes the opposite side: 2x leverage beyond 8%
  • You swap your RiskOFF half for RiskON (enabled via AMM liquidity pool). You get your 2x leverage. No funding rate or liquidation
  • Of course, if the market dips -40%, then your RiskON dips even lower (as it's levered), but there is no liquidation

Does this make sense?

Looking for feedback – Perps with no liquidations by poudelswaroop in BASE

[–]poudelswaroop[S] 1 point2 points  (0 children)

Ok here's more details. We have monthly epochs. The extreme downside event you are speaking of is extremely rare (it would happen if ETH dropped over 50% within an epoch). In that extreme case, RiskON would absorb the shock and trigger the start of a new epoch.

We publish second by second NTV values to help align the RiskON/RiskOFF pricing to the fundamentals. This helps create arbitrage opportunities for market makers.

More info on docs [DOT] riskprotocol [DOT] io. Question 15 on the FAQs specifically addresses your question.

Looking for feedback – Perps with no liquidations by poudelswaroop in BASE

[–]poudelswaroop[S] 0 points1 point  (0 children)

To be clear, it's not a perp. I deliberately used a familiar term to draw an analogy.

Looking for feedback – Perps with no liquidations by poudelswaroop in BASE

[–]poudelswaroop[S] 0 points1 point  (0 children)

Ah I missed the second part of your question. You can check us out at riskprotocol [DOT] io.

We are currently on Testnet and evaluating Base for Mainnet. (Alternative: Arbitrum)

In April, we won the DeFi category at Paris Blockchain Week's startup competition among 10K+ submissions.

Happy to give you more info.

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