Recent events have reminded us that stablecoins aren't always so.. stable. What if there was a way to bet on this stability?
A friendly guide to Earthquake from @y2kfinance ๐งต
Remember that Saturday morning a few weeks ago when the price of USDC dropped below $0.90 on the back of the SVB news and for a few days it seemed like the entire crypto industry was at a tipping point?
Feels like ages ago, already
Depegs are not good for anyone. The markets can absorb volatility with a ponzi token, but stablecoins are a whole different ball game โพ
Unless you had a way of predicting these deviations - and making profit from them too.
Enter Earthquake from Y2K Finance ๐ฅ
An easy way to think about Y2K Finance is a prediction market for stable assets - made possible with their flagship product, Earthquake.
Earthquake consists of two codependent vaults, Hedge and Risk.
For easy reference, remember this:
๐ Hedge = yes depeg
๐ Risk = no depeg
Earthquake vaults are crypto's CAT bonds.
These are debt instruments used to raise money for insurance companies for emergencies like natural disasters. Issuers receive the payout ONLY IF conditions are met (disaster strikes)
Likewise, with Earthquake vaults, depositors will receive payment if their stablecoin depegs/does not depeg. This isnโt your average DeFi strategy vault ๐ง
TLDR; a win-lose scenario where one side bets on an asset depeg, and the other side bets on no depeg to occur.
To use Earthquake, users deposit into either one (or both!) of the two vaults, Hedge or Risk.
You select:
- Asset to speculate on
- Strike price
- Epoch
- Deposit amount
The protocol collects a 5% fee for Hedge and Risk Vault deposits, and 5% for risk collateral yield.
Keep in mind each epoch has a start date before which anyone can deposit.
The user receives an ERC-1155 vault token upon deposit, representing their share in the vault. This token can be staked to farm APR during the epoch.
Btw Y2K uses @chainlink oracles for its price feeds ๐ฎ
Hedge ๐
Think an asset will depeg? Time to Hedge ๐ณ
By depositing into Hedge, users purchase "depeg insurance" and collect a share of the Risk vault deposits if the asset depegs.
Likewise if there is no depeg, Risk vault collects ETH from the Hedge vault
Risk ๐
Feel confident in an asset's peg? Choose Risk
Risk depositors sell depeg insurance - if the asset does not depeg, they collect Hedge deposits, and vice versa.
Keep in mind Risk vault receives the insurance premiums from the Hedge vault either way, as it is underwriting
a simple example for reference
1 user deposits 1 eth in the hedge vault, with 4 eth in the risk vault currently.
depeg occurs:
โข Hedge depositor receives the 4 eth
no depeg:
โข Risk depositors receive a portion of the 1 ETH
(I did say SIMPLE example..)
So.. do they work? What's the alpha?
Finding winning strategies on Y2K is no easy task. Depegs are not very common and most times Risk vaults depositors are on the winning side.
If you ape into a Hedge vault because you see a 4 digit APR/ROI you will probably lose your money.
When in doubt, follow the smart money ๐ง
Let's take a look at what the top 5 leaders on Y2K have been doing, courtesy of this incredible piece from @caZUBelli mirror.xyz/0x565D380416a2889b817C6Eb493f6DeeF029212Aa/I7I6XvJSRGO7uTjeqiFX7Xwa66Q7YoIunIRkhBpub2o
Whale 1 : 0xf9aeb52bb4ef74e1987dd295e4df326d41d0d0ff
Strategy: 98% Risk 2% Hedge
Whale 2: 0x5c6d32cbcb99722e6295c3f1fb942f99e98394e8
Strategy: 98% Risk, 2% Hedge
- Note the risk_vault earnings cover his losses from the hedge_vault - this guy is playing 4d chess.
Whale 3: 0x69c509e9765c49cc6b9b4568b90aa47b89f4992f
Strategy: 100% Risk for FRAX / DAI / USDC
- This investor has also been noted to reinvest 100% of his profits into the next epoch - a true Y2K maxi ๐คฏ
Whale 4: 0xe9e1479a9a6dde5dd0ee4ac9bee0091eba5e9e37
Strategy: 98% Risk, 2% Hedge
- This investor DCAs into the vaults from opening til closure
Whale 5: 0xd97a2f65f89f99ce03ca8f3fd2431d053d387e8f
Strategy: 100% Risk for USDC
Take note of the similarities and trends in their strategies, and what you can learn from it for your own strategy. Also keep in mind, these are big boys playing with big boy size. Their risk assessment and preference can look entirely different from yours.
some dashboards for your reference ๐ต๏ธโโ๏ธ
y2k finance overview dune.com/frijoles/y2k-finance
find the y2k whales dune.com/toubi/y2k
$y2k holders and activity dune.com/0xYaki/token-dawg-mode?blockchain_e06679=arbitrum&last_n_days_t94746=60&token_address_td507f=0x65c936f008BC34fE819bce9Fa5afD9dc2d49977f
Farming yields ๐งโ๐พ
In addition to the vault payouts at the end of each epoch, users can earn some substantial yield by farming their vault tokens.
twitter.com/y2kfinance/status/1642970574069837828
My personal thoughts ๐ญ
Innovative crypto projects are surprisingly hard to come by in an industry, so theyโre always worth noting when you come across one. I believe Y2K Finance caters towards an underserved area in crypto and can generate some strong first mover advantage.
Furthermore, Y2K is still fairly new which means there's some exciting things to look forward to :
๐ฅ Wildfire : a marketplace for exchanging vault tokens (exit/enter positions in real time!)
2๏ธโฃ Earthquake V2: Perps. binary vaults with 7 day protection, improved UX/UI
A quick word on security ๐ก๏ธ
Nothing in life is risk free, but Y2K has been audited several times by Peckshield and Halborn, which you can view in their docs y2k-finance.gitbook.io/y2k-finance/products/earthquake/contracts-and-audits/audits.
The docs also provide a thorough overview of contract addresses and their individual functions
DISCLAIMER: None of this has been financial advice. DeFi is risky - always DYOR and be diligent about it.
Some sources to stay up to date on stablecoins ๐
- refer to โstablecoinsโ category on coingecko
- use defi llama stables dashboard
- stablecoins.wtf
- y2k discord
in the style of @schizoxbt :
red team ๐ด
@rektdiomedes
@Chinchillah_
@defi_mochi
@CryptoKoryo
@0xCrypto_doctor
@2lambro
@0xFlips
@DeFiMinty
@Subli_Defi
@0xsurferboy
@crypto_yuvi
@burstingbagel
@DAdvisoor
@defiprincess_
@francescoglt
@Louround_
@CJCJCJCJ_
@crypthoem
blue team ๐ต
@thelearningpill
@0xSalazar
@WinterSoldierxz
@_FabianHD
@jake_pahor
@kindahangry
@Slappjakke
@arndxt_xo
@CryptoShiro_
@ThisIsM1NH
@crypto_linn
@rektfencer
@NNovaDefi
@OvrCldJonny
@0xShinChannn
@DefiIgnas
@Auri_0x
@0xFastLife
Have a great day everyone ๐