HEDGET AMA with Malcolm Lerider and Serge Lubkin
Eric: Welcome, to the AMA (Ask me Anything) room!
Malcolm: Thank you Eric!
Serge: Hi everyone! Pleasure to be here!
Eric: Can you two introduce yourselves to the group?
Serge: Sure thing! My name is Serge Lubkin, I was Chromia marketing lead during IEO and further exchanges listing. I built relations with communities and influencers. i’m msc in Economics, but all my life I’m doing marketing for various projects. Also I’m experienced derivatives trader, traded a lot on bitmex and binance later as well as Deribit, mostly perpetual swaps and futures but also options
Malcolm: Hi everyone, I’m Malcolm, cofounder of Hedget. I ran the R&D at NEO back in 2017, and worked on global blockchain projects at PwC after that. I have been doing business development and community building at Chromia after I left PwC, as I see Chromia being the most flexible and usable blockchain from R&D and business perspective. We now have a very exciting project to prove what Chromia actually can do, and it’s called Hedget ;).
Serge: So we had this idea for a while, why not to build the platform for options, but later on this:).
Eric: Awesome background. Formidable founders for sure. So what is Hedget?
Malcolm: Hedget is a “Gadget for Hedging”, a platform for P2P decentralized options. You pay the smallest possible premium to secure your positions against unexpected price movements, seeing what we did the last few days, it’s pretty nice to have products like that.
In an industry where many take advantage of “gambling behaviour”, we want to offer the exact opposite — a possibility to remove risk in a decentralized manner. So our values are aligned around removing risk in crypto.
Serge: Yes, it’s like basically insurance for very volatile crypto markets.
Eric: Ah Hedging Gadget = Hedget. Pretty cute.
Why do you think there is a need for a decentralized derivatives exchange? What are common problems with centralized ones?
Malcolm: I don’t “think” there is a demand for decentralized options — we have already confirmed that there is. The market for options is bigger than leveraged products in traditional markets, but this is not the case in crypto. We in the Hedget team believe that we are just at the beginning of a boom in the options market in crypto, and if so, we have to grab this opportunity to grab early market share.
Serge: Common problems in centralized solutions are basically:
- Trust (you need to deposit your funds and hope you can get them back)
2. Manipulations (exchanges can use fake capital to manipulate the market)
Also you cannot use centralized exchange for decentralized products. So all lending protocols need decentralized solutions.
Eric: Good points. So what is the purpose of the HGET token? How does the liquidity mining work?
Malcolm: HGET token is used for governance and anti-spam functions. Governance should have the power to change parameters, for example fees and where these fees are distributed, which could be governance stakes.
Liquidity mining will give reward to options that are written and then purchased, as these are providing direct value to the platform.
The fees will be structured in a way that any potential bots will lose money by writing and buying their own options. We want to build a system where market price that reach equilibrium is rewarded.
Serge: Exactly! Anti spam function of the token basically works like that: you need to stake certain amount of tokens to execute trades, bigger volume- bigger stake needed.
Eric: A big annoyance with DEFI is ETH’s scalability problem with the slowness and high fees popping up from time to time. Does Hedget address this in any way?
Malcolm: ETH clog may affect the time it takes to create a new option (with new collateral) and the time it takes for settlement on ETH base layer, but that’s about it. Buying and selling options will not be affected.
Plus, let’s say the option expires and is not exercised, then the seller can create new options with the same collateral without any new transaction needed on ETH. Makes it very flexible for option writers.
Serge: Yes, fees on hedget will be 100% predictable and setup by governance, not Ethereum miners.
Eric: You mentioned that you plan to offer this to lending protocols? Is it for the end user or the protocol itself? Why will they want to use this?
Malcolm: Both actually, but mainly the protocol itself. Many lending protocols are partially collateralized, and that carries a risk. The protocols can mitigate this risk completely by hedging with options on Hedget.
That being said, it could of course be very beneficial for users of the lending protocols to hedge as well, but it requires knowledge that your average user may not have. I can however imagine institutional investors taking advantage of lending protocols while also hedging on Hedget.
Serge: Liquidations problem is HUGE, everyone is suffering because of it: protocols and end users.
So it is the solution for both, to make markets more stable.
Eric: Can you give more details about Hedget’s working relationship with Chromia? And what is it about Chromia that made the partner of choice?
Malcolm: Chromia is bootstrapping this project. We receive development resources, know-how, and other support from the Chromia team.
Chromia is just so much more efficient to use when developing DeFi products. It is a relational database wrapped in a blockchain, which means we get all the benefits of transparency and immutability, while we still can develop complex financial products as they are developed in traditional markets on relational databases.
We will have short development cycles with high freedom in functionality.
Serge: Yep, thanks to Chromia we will have functional preview in few weeks.
So you guys can try trading options very soon
Eric: One more question and the group will be opened for community questions.
It was reported that you were offered more than the 500,000 you raised. Why not raise more?
Serge: Actually we raised a little bit more than 500k the final amount will be announced soon when all agreements are settled. We capped it for two reasons.
So, first reason — we need to show results and not being overflood with funds, second reason — we want community to be able to participate as much as possible.
Malcolm: We are building a DAO here, and only need to bootstrap it. Raising more than that doesn’t make sense, it would just end with private investors dumping on retail — sooner or later. Raising millions and spending it on your friends while people pump & dump — yeah, let’s not do that. Participants and supporters must benefit.
Eric: Ok. lets let the community ask the next set of questions.
Q: What is the importance of HGET erc20 token and why HGET choose Ethereum based Blockchain? There are many Blockchain available. HGET can choose trc20 also, but why erc20?
A: HGET token will have dual representation on both Ethereum and Chromia blockchains. We chose Ethereum because of its large ecosystem.
Q: The biggest dilemma in crypto space is volatility and liquidity issues. What’s your steps have been taken by Hedget to overcome this dilemma?
A: Volatility is pretty much the core problem we solve by issuing a platform for P2P options ;)
Liquidity is one part solved from liquidity mining — option writers are rewarded. Another part is to collaborate with protocols that are partially collaterized, offering a solution for them to mitigate their risk.
Q: What is the purpose of Hedget Foundation as non-profit organization? To maintain the stability of transmission system or to maximize the profits of trading/holding users?
A: It’s temporary organization before HEDGET DAO will take place. The goal of the foundation is to initially develop the project and to make it more popular and connected to other projects.
Q: What’s the way you are handling price fluctuations on negative side when market slips 5–10% ? Is there any smart way using “Hedge your crypto holdings” is backed By stable coins? Can you explain in detail about the “Hedge your crypto holdings” product?
A: It works like this: you are buying option for some asset which gives you the right to purchase or sell this asset at the certain price in future. This gives you ultimate protection from any price volatility as well as potential to gain. We will explain more how it works in our educational session.
We want to make options and hedging in general more understandable to retail investors. Part of this is to integrate options in a way that it is making sense for the average user, for example when they are purchasing or selling tokens on other platforms. Collaborations is important
Q: What makes Hedget stand out and be different from similar projects ?
A: UI and usability in general like in Centralized exchange with all properties of Decentralized exchange (you control your funds, relying ultimately only on Ethereum smart contract, also open source and transparent. Best from both worlds.
Q: What your plans in place for global expansion, are you focusing on only market at this time? Or focus on building and developing or getting customers and users, or partnerships?
A: Decentralized options is our primary focus at the moment, and within that, liquidity is primary focus.
We have the flexibility to adapt along the way as we have Chromia as underlying blockchain, it’s really huge advantage that shouldn’t be overlooked. Relational blockchain is so powerful.
Q: What are your priorities for this year?
A: 1. Launch MVP and attract first users
2. Strike partnerships with crypto funds as options writers and lending protocols as options buyers
3. Build liquidation prevention open source tools which connect with Hedget for the market to use freely
Q: Due to LEVERAGE TRADING, lots of dollars keep getting liquidated, so how can HEDGET be of solutions to us on multiple exchanges, would you have an API which can be linked to my exchanges?
A: We aim to have easy integration with both centralized and decentralized exchanges to onboard more liquidity while also adding value to their users.
Q: Southeast Asia is a very vibrant market and most projects are competing campaigns here to entice users and grow, with #HGET you see how Southeast Asia is and do you plan to develop & expand here?
A: Hedget team is everywhere! I’m myself based in Southeast Asia, while Serge is in Europe. We have good reach.
Q: What is the structure of the company, is it a decentralised, open sourced protocol where everybody can contribute? If so, how does the governance plan on being handled?
A: It will be fully decentralized protocol managed by DAO in a late 2021.
Right now to kickstart the project non-profit Hedget foundation will govern the platform. But yes, Hedget is fully open source and transparent.
Q: What problems did you face when trying to implement your product in working businesses? Is it hard to explain to non-crypto people what is HEDGET is and what are the advantages of using it are?
A: Non-crypto people don’t need to know about Hedget. It’s a platform for hedging crypto, so it’s for crypto people.
Q: According to your website,through the use of collateral, investors can create and trade different option product so what kind of collateral can be used by investor in trading different product in Hedget? What products can be trade and how will be the sharing of profit between the investors and Hedget?
A: To write an option for ETH you need to put ETH as a collateral.
Option writer will get a rebate for each option bought and additionally each option settled. The platform is going to take only one small fee of 0.02% once option bought. The detailed fee structure will be presented in Hedget whitepaper this week.
Q: How do you see the future of #HGET in 5 years to come, do you feel it will continue to grow till it achieves it’s ultimate goals, or do you see the probability of competitions over taken #HGET due to current challenges that you are facing.
A: The early players in leverage trading, for example BitMex, have taken good advantage of organic growth. Hedget team believe we are in a similar early position now for option trading, so in 5 years, we should aim to have Hedget as market leader in decentralized option trading.
Q: What are the risk control mechanisms offered on Hedget to protect market speculators from major losses in derivatives/options?
A: The risk control mechanism is an option itself. You buy option “to fix” the price you need. You cannot lose more than the cost of the option. If you don’t need it in the end you can resell it before maturity or just “throw away”, not a big of a deal :) that’s why options are perfect for hedging but also speculations. You can see it both as an analogy to an insurance or a lottery ticket.
Q: How does Hedget choose cryptocurrencies for supporting in your platform? And how do you solve liquidity problem? How easy is it to use your platform in an existing infrastructure?
A: Option writers will decide which tokens to offer. In terms of liquidity problem, we have 50% of total token supply for liquidity mining. This is a platform for users, easy to integrate in existing infrastructure, both decentralized and centralized.
It will be the most popular assets on Ethereum blockchain at the start.
Liquidity problem will be solved with partnerships and liquidity mining.
We will make everything possible for easiness of integration with current DeFi infrastructure.
Q: In cases where the market moves too abruptly, Does Hedget provide an insurance fund to cover the traders’ additional losses beyond their invested trading capital?
A: The true beauty of options (fully collateralized as you have on hedget) is you don’t need any insurance fund, you also don’t have any liquidations. It’s really cool!
Q: Nice I can pay the smallest possible premium to secure my positions against crash, what is your price list and payment options and kindly explain your decentralised options.
A: Current proposal is:
Taker fee 0.04% of underlying
Maker fee -0.02% of underlying (reward)
0.02% difference to governance stakes
This is still subject to change.
Q: I dont even see any competition for this atm, since Hedget wont be an exchange but a decentral liquidity provider, its gonna be a win/win for most exchanges and dexes am i right? Best price means lowest ask and highest bid right?
A: Yes, it will be lowest possible market price as it’s fully P2P.
Q: If you offered to lending protocols as a security feature against user position liquidation. how long would you like to fix a rate for? a week, a month, a year? Are there any automated tools you use that simplifies your processes?
A: Cool question, so it will be a line of option products with different maturity dates and strike prices. We are planning to have the most versatile and liquid option platform on the market, and thanks to liquidity mining we have all chances to become one very quickly.
So yes, you will have 1 hour/day/month/year and other options to hedge your positions.
Q: How does option products protect against decentralized price risk against crypto assets? How does HEDGET control the risk status of its users and how do they act as intermediaries?
A: It protects by requirement on 100% collateral. If you want to write an option on 1 ETH, then you need to lock that in the Ethereum smart contract. There is no counterparty risk.
Q: To be successful on many use cases with the key is sharing economy without intermediaries, HGET will need to build a big user base, a top quality decentralized platform with strong ecosystem and a strong community to support for it. So, how will HGET handle all these works with highest effectiveness and attract new users to use your platform instead of their favourite ones?
A: I agree with you. Our private sale was small, filled quickly, and limited to max 20k USD, so the small initial stake is already spread out. We want the network effect without one party controlling too much.
50% of token supply is for liquidity mining. The users, the one writing options on Hedget, are the one that will get tokens to govern the platform, unless purchased from market. I think it’s a fair that the users get to govern.
Eric: Ok. thats all the time we have for the AMA. Thanks @malcolmlerider and @sergelubkin! Please invite our community to join your group and twitter and other announcement.
Serge: Thank you all! Please join https://t.me/hedgetchat
Malcolm: Thank you everyone! Also check our website for updates and links to social media channels: www.hedget.com
We are moving pretty fast here and this is out very first public appearance, thanks to Eric!
Malcolm: If you are interested in what we are building, make sure to check our new channels frequently
Eric: Thanks Hedget team.