Defi Derivatives and Exotic Options with Cega
You’ve heard of Web3.0 but have you heard of Defi 3.0? This Twitter Spaces interview brings an inside look at Cega’s exotic options platform. The Cega team sits down to discuss what they’re building thanks to Solana and Serum, as well as what it can mean for the future of Defi.
Tell us a little bit about how you put your team together and how Cega got started.
I wrote the whitepaper on the spot during Solana Breakpoint and then spoke with a couple other founders of Solana derivative protocols. That evolved into a lot of coffee chats and interviews, and then I met our dev co-founder, Felicia, through dinner with a mutual friend. After that, I met Winston’s twin brother at DefiCon in New York.
Instantly there was a connection between all of us around this vision for creating a high-yield product that’s safer, more responsible, and ultimately benefits users. And, 5 months after writing the whitepaper and initially meeting the team, Cega was launched on DevNet.
You guys just launched on DevNet a few weeks ago. Congratulations! What are some takeaways from this for users and do you have any exciting news to share?
Well we’ve already received thousands of test users and lots of feedback from our community, which is really great. Some of the takeaways for our users would be, number one, to try out Cega. Especially our simple UX/UI product.
Options can be advanced, complex subjects. Especially when it comes to exotic options. Our goal was to really simplify things for our end user.
Second, we also want users to learn more about the product via our documentation. There’s tons of great content that explains, in detail, these exotic options products that we’re building at Cega.
The last takeaway for our users would be to give us feedback. We’re constantly trying to talk to our users to learn about their needs and to get their feedback to ensure that we’re building a really great product for them.
For the audience that may not be familiar with exotic options products, can you share some of the differences between vanilla and exotic derivatives and some of the advantages exotic products offer?
The way we define the difference between exotic and vanilla derivatives is the way you price those products. Vanilla derivatives are very simple options. They’re the ones traded on a variety of platforms, including Serum, and they usually involve the traditional calls and puts. These types of options use a formula called black sholes to calculate the price.
For exotic derivatives, you actually have to do 20,000 to 100,000 simulations of market environments to estimate the price of the option. It’s actually a very interesting statistical model that has a lot of advantages when you want to create a product that showcases a unique view of the market.
With exotic derivatives, you can express practically any view of the market. This allows you to structure products in such a flexible way where you can make things very high risk, high reward but you can also make things very safe with a good amount of reward. This flexibility is key because it enables us to cater to a wider range of user needs in the market.
What are some of the opportunities you see for Cega and Serum to leverage each other’s technology and develop further?
There’s a ton of opportunities for Cega and Serum to leverage each other’s technologies. That’s actually one of the coolest things about most Defi protocols today — the composability.
So, for Cega’s DevNet and MainNet, there isn’t an integration with Serum. But we think there’s a lot of opportunity in the future. For example, let’s look at the Cega vaults that users deposit their capital into.
Right now, when users deposit their funds into the vault, they receive a token that represents the exotic options contract and represents the investor’s stake in that vault. Currently, these options vaults have a 30-day maturity window. This means an investor’s capital is staked for 30 days and they get that back when that time is up.
In the future, to give investors more flexibility, they may actually be able to get some of their capital back during the active lifespan of their option by trading their vault tokens with other users. Building something like this would be a really great opportunity for Cega to leverage the order book that Serum has built. That’s just one of the examples we’ve been thinking about, but there are likely lots of other ways we can build off of each other’s technologies.
Cega’s tagline is “More yield. Less Rug.” What are some of the problems that Cega is solving for investors?
Well, like our tagline says, those are two of the chief problems we’re trying to solve for investors in addition to a couple of other ones. So, the first one would be the declining yields across the industry. Cega solves this problem by offering the exotic options products with return 2–3x the APY of other types of strategies. In fact, some OTC trades we’ve already executed with market makers have been returning 60% to triple-digit APYs. That’s something we’re really excited about offering to our retail investor community as well.
Investors feeling “rugged” and losing capital is another major problem we’re trying to tackle. We want to make sure that users can invest and collect a high yield while preserving their initial investment.
A third problem we’re solving is improving the diversification of investment opportunities for investors. So, similar to TradFi where an investor may allocate their capital across different types of asset classes, we enable investors to do the same through exotic options products.
Lastly, another problem we’re solving is just how challenging it can be for the average user to approach Defi. We’re really working to make sure things are simple and easy to navigate both from a UX/UI and financial product design perspective.
With your pending MainNet launch, are there any other additional products you guys are thinking of launching?
So, we are thinking of launching a couple things. Our main product will be the fixed coupon notes, for sure. All of these coupons will have different sets of underlying currencies and there are some exciting pairings that we’re thinking about.
We’re also planning on rolling out a vault for our SuperSanics only. SuperSanics are our group of super fans on Discord who are responsible for helping us build the Cega platform.
In terms of actual derivatives products, we are currently talking to some market makers about different derivative products we can offer and we’re looking to do test trades on some of them. Those are all very exciting and we can’t wait to share them soon.
Exploring Exotic Options and More
That’s a wrap on another week of Project Serum Twitter Spaces interviews. What an insightful look into all the amazing things happening on Serum and in the digital economy as a whole. Thanks to brilliant people in the space like the Cega team, we’re seeing a new economy spawn right in front of our eyes.
For more on what the Cega team is doing with Serum, check out the full YouTube video or Twitter Space interview.
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