iGain IRS - User Guide
iGain - Interest Rate Synth is the solution for decentralized lending fluctuations, allowing users to achieve fixed-rate lending and borrowing by trading interest rate derivatives.
For an introduction to the mechanism, please read this article:
In iGain interface, there are two approaches to realize fixed-interest lending. On the one hand, users can directly lend or borrow from Aave and then buy Long or Short tokens. On the other hand, users can choose our all-in-one solution to complete one-click fixed interest rate lending.
Here are some guidelines for both methods:
Method #1: Buy Long or Short Tokens:
Users need to lend or borrow crypto on the Aave platform, and then purchase the corresponding amount of Long/Short tokens on iGain IRS to hedge against future interest rate changes on the “Trade” page.
Step 1: Enter a stablecoin amount to estimate fixed rate, price impact, and cost of Long/Short required for hedging.
Step 2: Click on the “Unlock” button to unlock your account.
Step 3: Review all terms on the Trade page (Asset, Expiry Day, Mark Average APY, Market Price, Leverage, and Balance).
Step 4: Click on “Buy” to get a corresponding amount of Long/Short Token.
3 Key Metrics:
Principal to fix interests: While buying Long or Short tokens, users can enter an amount to estimate Principal in order to lock interests and hedge against the future’s ups and downs in their positions. This value is proportional to the level of leverage. The equation is as follows:
Position for Hedging = Long/Short Purchase Amount * Leverage Level
Fixed APY: The predicted amount of realizable annual fixed interest rates on the expiry day*. The calculation method of annual rates is relevant to the averaged settled prices of Long and Short tokens, the term period, and the realized interest rates. Read more in iGain whitepaper <Price Settlement>
Price Impact: The amount of slippage influenced by trading volume. The bigger the trading volume is, the greater impact it makes on price.
Users can click on “BUY” as these three figures satisfy their needs. On the expiry day, users can redeem their assets according to settled prices.
*Borrowing interest rates are selected as calculation benchmark in iGain IRS so the annual rates of fixed interests in the deposit are estimated with minor errors. Read more in whitepaper <Price Settlement>.
Method #2: All-in-one Solution
To simplify the operation process, we also provide a convenient and user-friendly solution to enable one-click fixed interest rate deposits and avoid going back and forth between Aave and iGain IRS.
On the “Fixed APY” page, the system can conduct two commands in one transaction.
- Deposit on Aave
- Buy Short tokens
These two actions can be done in one with the proxy contract.
Users merely need to enter an amount for deposit to get the purchasable number of Short tokens, crypto needed, and realizable annual rates.
There are three steps in this all-in-one service.
Step 1: Click on ”Fixed APY”
Step 2: Enter amount to get estimated purchase number, capital needed, and APY
Step 3: Click on the “Unlock” button to unlock your account.
Step 4: One-click for both ‘Deposit to Aave’ and ‘Buy Short token’
Not Just for Hedging, but for Arbitrage, too
Just like with quarterly futures, Long and Short tokens can be willingly traded before the expiry day. Hence, there are possibilities for arbitrage.
As the expiry day is approaching, the future uncertainties become less, which reveals arbitrage opportunities. The mark price is supposed to get closer to the index price.
APY Trend Overview is provided in iGain IRS for investors’ reference.
Mark APY represents the annual rate deduced from the present price of the Long token, implying the market prediction of the future interest rates. On the other hand, Index APY is the average annual rate calculated from the realized interest rate.
Arbitrageurs can make profits by trading Long or Short, also making the interest rate trading market to be more efficient!