It has been a year since Hegic fully migrated to Arbitrum and introduced a new liquidity aggregation and utilization model.
The main hypothesis was confirmed: the protocol can be consistently profitable on a long-term basis. Over a 12-month period, $458,000 of profits were distributed among the Stake & Cover Pool participants.
In the table below, you can see other key product metrics for the past year.
The work done to maintain the positive momentum was intense, and this report will highlight it, touching on two main aspects: economics and product development.
Part 1/2. Hegic Economics
1.1. Liquidity
Hegic V8888 had a fundamental problem of imbalance between stakers and liquidity providers. Liquidity providers risked their assets (WBTC / WETH / USDC) and were in losses most of the time, while the main earnings were received by stakers, who took only the risk of $HEGIC volatility.
The solution, named Stake & Cover Pool, was first introduced in the Hardcore version (February 2022). Its participants share 100% of the net positive or net negative P&L accrued due to the activities of the protocol’s users. Net profits are distributed in stablecoin (USDC.e at the time of publication), while net losses are covered by selling staked $HEGIC tokens at a fixed price.
Thanks to proper risk management, the maximum monthly loss has always been at most 5% of the coverage size, and the cumulative protocol net profit since the launch of Hegic Hardcore has reached $934,650.
In the described model, the most crucial aspects of the protocol’s viability are the amount of $HEGIC staked and their liquidity on the market. It’s pretty simple: the more tokens are staked and the more they are worth — the faster Hegic can scale up. Currently, about one-third of the total supply (1,077,684,725) is allocated in the Stake & Cover Pool.
This number looks impressive and sufficient, so the next step in scaling the protocol will consist of supporting $HEGIC liquidity and searching for a fair token price. Active work in this direction started in October 2023.
1.2. Sales
A common pain of all options exchanges is periods of low volatility. Few people want to buy Calls and Puts when the market moves like a crab.
and reached the bottom in August, resulting in lower trading volume
Hegic partially solved this problem by launching low-volatility option strategies (Long Butterfly and Long Condor) and inversion spreads (Bull Put Spread and Bear Call Spread). These products allow traders to earn when the price doesn’t change or changes slightly. They also gave the protocol an opportunity to make profits and hedge risks even when the prices of ETH and BTC were almost static. 10–30% of open interest is consistently concentrated in new strategies, confirming their market demand.
A variety of multi-directional products helps the protocol make hundreds of monthly sales. Thus, a local record of 1,650 purchases was set in February 2023.
Part 2/2. Product Development
Hegic Herge release was accompanied by a complete redesign of the user interface. Traders received easy navigation across all types of strategies and a user-friendly chart with real-time PnL calculation.
The updated and refreshing design system has paved the way for quickly integrating new features into the app. Here’s a list of sections that have been added to hegic.co over the past year:
A complete protocol guide describing the basic mechanics and option strategies available for purchase. The best place to start any Hegician’s journey.
The pulse of Hegic. Main dashboard with all fundamental metrics, including current and projected financial results, open interest, plus detailed information on every strategy ever acquired on Hegic Herge.
Everything about $HEGIC token: current price, total supply, supply by chain, and a list of actual pairs on DEX’es with available liquidity.
Top of the most active, most profitable, and most efficient traders. Best of the best.
All essential info about any Hegician served as its best. Perfect for tracking personal performance and monitoring the progress of others.
Marketing initiative launched by the Hegic Development Fund that allows loyal customers and influencers to earn a share of 2.5% from purchases made by referred traders.
Overall, the entire year was dedicated to increasing the protocol’s transparency and improving the user experience. In addition, the progress made during this period confirmed that the peer-to-pool options platform can have a healthy and scalable business model.
The next major release, coming in a few months, should redefine the usual approach to options and give users more of the unique tools that make trading more flexible and functional.
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DISCLAIMER: Hegic is an experimental open source protocol. Use it at your own risk. If you will lose any money using Hegic, you won’t be compensated or refunded. Only use Hegic with money that you can 100% afford to lose. You can lose 100% of your funds provided to the Hegic pools. Hacks, security bugs and economic abuses can happen because of an experimental nature of the protocol. You won’t be compensated in case of any losses related to the Hegic protocol. If you do not agree with any part of this disclaimer never use the Hegic protocol.
ACQUIRING/HOLDING/OWNING/USING HEGIC TOKENS DOES NOT PROVIDE/GUARANTEE YOU OR ANYBODY ELSE DIVIDENDS OR ANY KIND OF RETURNS. ACQUIRING HEGIC TOKENS DOES NOT PROVIDE YOU WITH ANY RIGHTS IN ANY JURISDICTION. HEGIC TOKEN IS NOT A CURRENCY BUT AN INTERNET DIGITAL UNIT OF NON-FINANCIAL UTILITY THAT CAN BE USED SOLELY IN THE HEGIC PROTOCOL. THE HEGIC PROTOCOL SHALL NOT BE LIABLE TO YOU OR ANYBODY ELSE FOR ANY DAMAGE OR(AND) LOSSES IN ANY CONNECTIONS WITH HEGIC TOKENS. IF YOU DO NOT AGREE WITH ANY PART OF THIS DISCLAIMER NEVER ACQUIRE/HOLD/OWN/USE HEGIC.
