Introduction to Entropy & [Redacted]
Unless you’ve been living under a rock this past few weeks, you’ve probably heard of [Redacted]. No, I’m not being coy — that’s literally the protocol’s name.
[Redacted] is a hot new DeFi protocol that has recently made waves due to its involvement with the renowned Crypto whale Tetranode and [Redacted]’s participation in the Curve Wars. Does all of this sound a bit much? Let’s take a couple steps back.
Entropyfi is a lossless decentralized gamified prediction market on crypto-assets, NFTs, DeFi indexes, and other on/off-chain assets. Essentially, users of the protocol can participate in price prediction markets without having to worry about losing their principal.
Here’s how it works
Let’s say you think Bitcoin will be below the price of $41,500 in the next 48 hours. In this case, you can go short and post your deposits — something like USDC or DAI, for example. If your prediction pays off, you earn a reward, funded by the yield generated on everyone’s deposit. Great!
From here, you can either roll these profits into another prediction and make your bet, or take the profits and wait until you feel comfortable entering again. It’s that simple. Entropy’s price prediction markets allow for users to experience trading without the loss of principal investment, all while actively investing and managing their own risk.
To dive briefly into [Redacted], the protocol can be described as a Convex 2.0 — the protocol accumulates the most powerful tokens in the Curve Wars and serves as a measure of voting power relative to the treasury’s TVL.
[Redacted] has managed to accumulate significant sums of CRV, CVX and OHM, positioning itself quite well in the Curve Wars. Because of these strategic moves, BTRFLY serves as a proxy of sorts for betting on the direction of the Curve Wars. As the Curve Wars continue and more players enter the space, BTRFLY will appreciate in price assuming Convex or OlympusDAO manage to stay in the lead.
Put simply, BTRFLY is a call option on the Curve Wars getting even spicier — and we all know how that will end up.
Regarding the proposal
Entropyfi has recently made a proposal to [Redacted] to allow for price prediction markets on their native token of BTRFLY. Here’s how it works.
Do you think that Convex will continue to dominate and control the Curve gauge? Buy some BTRFLY. Because of this accessibility, [Redacted] has created a token that not only accumulates value and produces revenues, but one that provides value to speculators. The crypto options market is still in its infancy, and tokens like BTRFLY are a way for retail investors to try their hand at predicting the tide of crypto narratives.
Entropyfi wishes to create a price prediction market for stakers of BTRFLY. This way, those who wish to hold their BTRFLY long term can capitalize on short term price movements. Let’s look at a couple examples.
Let’s say you think that BTRFLY is going to be $10,000 a token in a year, but you feel like there are some negative short term catalysts coming. Simply open a position to go short on BTRFLY, only risking your rebase rewards. If the price goes down, you earn money and hedge your bet. If the price goes up? Oh well, you lost some rebase rewards but your holdings still appreciated in value. This can be defined as a ‘soft hedge’ because of the lack of risk being taken in comparison to actual leveraged products.
In another scenario, you might believe BTRFLY is going to go up soon. To take this side of the bet, open a long position and predict where you think BTRFLY will be in a specified time frame. If your prediction is correct, you’ve successfully utilized ‘soft leverage.’ This term is used because contrary to how leverage works, you aren’t at risk of losing your principal.
Soft leverage allows for users to take advantage of price volatility and take more risk without the possibility of liquidation. Soft hedging helps users reduce their risk, while still earning rebase rewards in a scenario where price goes down. Entropyfi believes this proposal can help provide value to both BTRFLY stakers and Entropyfi users, as [Redacted] continues to make waves in the DeFi space.
The collaboration between the two protocols will not only provide value for users and token holders, but will increase awareness between the two protocols. Entropyfi and [Redacted] both bring unique and needed products to DeFi, and aligning incentives between the two can prove to be a strong partnership going forward.
(This article is written by @knowerofmarkets- writing about DeFi)