Understand KAKI’s WMM-DDH Mechanism in 1 Minute

Full Name: Writer market-making — Delta dynamic hedging.

WMM: Peer-to-Pool mode, better access to liquidity.

DDH: Hedge Delta & Vega risk and attract more liquidity.

Abstract:

KAKI’s mechanism is so innovative and unique that currently, no options protocol on-chain is the same as it. KAKI is essentially a decentralized options protocol with three trading pools that offer OTC European options.

The three trading pools respectively are:

(1) AH pool, provide options for buying and selling.

(2) S pool, AMM spot pool using x*y=k, similar to Uniswap, approach for hedging Delta risk.

(3) Sigma pool, a volatility trading pool using the virtual AMM mechanism(VAMM), is used to hedge Vega risks.

KAKI is a relatively complex protocol. It ensures that option buyers can earn reasonable alpha gains, and also can sell options at any time for cash settlement. KAKI protects LPs for stable returns, hedging Delta and Vega risk and harvesting Theta and RHO gains.

Advantages:

• High liquidity, peer-to-pool mode.
• OTC options are highly liberalized for purchase.
• The interface is simple and friendly to buyers.
• The options repurchase function allows holders to sell at any time for cash settlement.
• Minimize the LP risk by hedging the Delta and Vega risks.