Please note that this article offers a high level overview of the Hegic protocol’s staking architecture. Technical details and step-by-step guide on HEGIC staking will be published after the HEGIC token launch on 09/09/2020.
TL;DR Version
• Amount of tokens required for a staking lot: 888,000 HEGIC
• Maximum staking lots available: 3000
• Maximum amount of HEGIC locked in staking: 2,664,000,000 HEGIC
• Maximim share of HEGIC total supply locked in staking: 88.5%
• Staking rewards source: 100% of settlements fees paid by buyers
• Staking rewards size: 1% of each option’s size in ETH and WBTC
• Staking rewards are accumulated and distributed in: ETH and WBTC
• Staking rewards distribution: Same % per each active staking lot
It’s not only about staking. It’s about you changing the global options game with Hegic.
Centralized past:
- Crypto options exchanges — custodial, closed-source, centralized;
- Revenues source — maker/taker fees, delivery fees, withdrawal fees;
- Operational expenses — monthly salaries paid to tens and hundreds of full-time employees, commercial real estate expenses (renting offices), centralized servers, databases and infrastructure maintenance etc.;
- Know Your Customer procedure, ability to block users’ accounts, ability to share users’ trading and financial data with regulators (taxation);
- Profits are distributed among the founders and a small number of shareholders without any exposure to upside for exchange’s users.
Decentralized future:
- Options trading protocol — non-custodial, open-source, on-chain;
- Staking rewards source — taker (buy) fees only;
- No monthly operational expenses on salaries, real estate expenses, centralized infrastructure maintenance — community-driven funding;
- No data is collected from users: no registration, email or KYC;
- 100% of fees accumulated are distributed among the token holders who are participating in staking — protocol’s users.
HEGIC Staking Lots
The Hegic protocol generates settlement fees in Ether (ETH) and WBTC paid each time an option contract is bought. People are able to acquire HEGIC tokens and activate a staking lot that gives its holder a right to receive staking rewards. 100% of settlement fees in ETH and WBTC generated by the protocol are distributed among the staking lots holders.
Each active HEGIC staking lot receives a fixed percent of settlement fees paid out in staking rewards. For example, if there will be ten active staking lots, each of them will be receiving 10% of rewards; one hundred active staking lots — each of them will be receiving 1% of rewards; one thousand active staking lots — each of them will be receiving 0.1% of rewards.
Activating/Deactivating Staking Lots
To start earning settlement fees, one should acquire 888,000 HEGIC tokens and lock them on the staking contract. The required lock-up period is 7 days (changed from the initial 30 days lock-up period). During this period a token holder won’t be able to withdraw HEGIC tokens from the staking contract. After this period, she can initiate a withdrawal.
ETH and WBTC Staking Contracts
Amount of tokens required for one staking lot is 888,000 HEGIC. Each of the staking contracts gives its holders a right to receive a share of rewards. Staking lots holders can choose to receive a share of rewards in ETH paid by the ETH call and put options buyers or a share of rewards in WBTC paid by the WBTC call and put options buyers.
Staking Rewards Source
Options buyers are paying premium plus settlement fee when they acquire options contract. Premiums are distributed among the liquidity providers and settlement fees are distributed among the HEGIC staking lots holders.
Settlement fees (currently 1% of each option’s size) are paid in ETH and WBTC by options buyers and accumulated on the HEGIC staking contracts.
After HEGIC tokens are deposited to the staking contract, a token holder becomes an active HEGIC staking lot holder. She starts to receive pro-rata settlement fees in ETH or WBTC accumulated on the staking contract. She will be receiving rewards starting from the first fee that will be accumulated on the contract after her deposit of HEGIC tokens on the staking contract.
Accumulate → Stake → Earn
In conclusion, as it has previously been stated in the Crypto Options Market Analysis article, having a 1% market share could lead to decent settlement fees inflows for HEGIC staking lots holders. With settlement fees distribution among the active staking lots holders instead of a centralized options exchange revenues distribution, HEGIC token’s value capture mechanism can become one of the world’s first options trading protocol’s flywheels.
Learn more about Hegic
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