HEDGING SWAPs

Published in

MetalSwap

5 min readJul 23, 2022

Dear Swappers!
TestNet Phase 3 is going crazy, and given the fact that it wouldn’t be the first time that interactions with our contracts have taken up 50% of the available space in the block…. we can peacefully say that MetalSwap is conquering Kovan! Soon we’ll share some intresting stats about it!

If in last Medium we focused on the Liquidity Providing side, today’s will be an in-depth look at the other side of our platform:
Commodity SWAPs, also known as Hedging SWAPs, or more generally, Financial SWAPs!

An insurance over the price volatility of a commodity in a specific direction.

MetalSwap wants to do this kind of thing with a variety of commodities including metals, and the best way to start in a DeFi manner, perhaps, will be with the newest commodities on the market: they call them crypto, and MetalSwap is starting its journey with WBTC and ETH.

So how to hedge against their volatility?
Let’s go to test.metalswap.finance and learn together!

Here we come to the most important page, the core feature of MetalSwap: the one from which you manage your hedging positions and interact with our smart contracts, now officially in Audit phase with Certik!

The higher page shows the Current Coin, switchable between ETH or WBTC, with a simple Chart about Price, Volatility 24h, Volatility 7d, and a Price Trend about last month.

Under that, the legenday Swap Manager:

On the left of the operating console, we have a graph representing the operation we are carrying out.

We see the Price of our commodity in real time, the Threshold and the Premium that must be paid to open that position.

Please note: the Cover, with its Threshold is set by the swap operator and paid to the platform with the Premium to open a new Swap.

If the price goes in “blue direction”, your Cover will stay there and will come back with profits when the swap expires. If the price goes in “red direction”, that amount is eroded. If the price will reach the Threshold level before the Expire Date, an open position goes liquidated. We’ll see later how to manage this, closing your swap in advance or adding margin liquidity to let it be still open & away from liquidation risks.

ETH Swap not allowed- missing liquidity from the other side.

Now let’s take a look to the right of our colored rainbow:
the Central Slider allows us to simply change the Threshold value, adding margin to set that position far enough from liquidation.

The right of the operating console is where we’re setting our Swap details:

• Target Size: quantity of ETH or WBTC on which to apply the hedge.

• Expire date: closing date of the Swap operation.

• Cover: hedging value in the event of a change in the price of the raw material in the direction we’re not afraid of.

• Liquidity reward: Bought-back or incentive-paid $XMT to those who make a swap expire with the pre-set date. Being a decentralized project, MetalSwap is distributing the governance token to those who use the platform.

After setting the desired values in the appropriate sections, we can proceed by clicking on the “Open Swap” button, if the current liquidity on the platform permits to do so. Speaking about it…

The Swap Balancer is the section that graphically represents the percentages of swaps already open and active. In the center we can find a clear indication about if we are currently Allowed to open a new swap in that direction.

Last thing to give is the Allowance, and we’re ready to Open a New Swap!
Open Swaps will appear below:

As we said before, when clicked, an open swap gives the possibility to add cover with the Refinance Swap button, or to be closed in advance with Close Swap button.

Please note: when closed in advance, the swap is eroding a little more margin as penality, and liquidity reward show in $XMT at the moment of the opening, is collected over time while the Swap stays Open!

Yes, because that Premium we paid at the beginning is used to buy $XMT directly on the spot market, to be given as a reward to everybody is providing liquidity or keeping opened their Swaps on MetalSwap!

Now, on Kovan, our dear Testers are collecting $XMTT3 , that will be changed on Polygon Network for real $XMT at the end of the event!
That’s an incentivized Testnet!

Don’t you know how to join?
So you’re missing our previous Medium, giving all the info you need!

Now that we undestood how the main dashboard works, we can start to put our head on some possible usecases… coming very soon!

What a time to be in DeFi!!

⚠️Warning⚠️

❗ METALSWAP ‘s admins or moderators will NEVER contact you directly on any social under any kind of circumstances.

❗ Everything concerning $XMT ‘s smart contracts and addresses is shared by our official channels (list below), do not trust any different info from any different source.

To the MetalSwap!

… and beyond!

✎ What is MetalSwap?

MetalSwap is a decentralized platform that allows hedging swaps on financial markets with the aim of providing a coverage to those who work with commodities and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable hedge swap transactions through the use of Smart Contracts, AMM style.