Ahoy there Clam Island residents, we bring you good tidings!
Clam Island has partnered with Hedgey Finance, a novel decentralized protocol that takes traditional finance options and repackages them specifically for DeFi needs.
Hedgey was one of the twenty teams within the same Tachyon Filecoin Accelerator Program cohort as Clam Island. We were impressed with Hedgey’s team and flagship product (which is currently live at https://hedgey.finance/), and we believe there to be several key areas where Hedgey and Clam Island can collaborate.
Hedgey Finance unlocks the potential of native DeFi tokens through clever usage of call options that align all parties involved with the growth of the underlying platform that issues the native tokens. Anyone can use the Hedgey Finance platform to buy or sell options on any token across multiple chains. Hedgey Finance is currently live on Avalanche, BSC, Fantom, OkExChain, Polygon and xDai.
In projects like Clam Island, the treasury usually amasses a much greater amount of native tokens than it can reasonably use at any given time. Through Hedgey Finance, Clam Island can offer some of its treasury $GEM tokens as call options to reward contributors, team members or advisors. The advantage of using call options is that it aligns the recipient of the options with positive growth of the platform and token price.
It is not the intention of this article to explain how call options work in detail, as this information can be found relatively easily on the Internet, even if the concept may take some time to understand for those less familiar with stock options. However, the basic idea is that call options are only of any practical use where the token price hits an agreed “strike price”, which generally is a price that is higher than the current token price. For example, if $GEM price is $1, and we offered call options to an advisor at a strike price of $1.50 with an expiry date of 3 months, it means that the advisor only gets the benefit of the call option if $GEM price hits at least $1.50 within 3 months. This is because a call option gives the advisor the option to purchase $GEM from our treasury at $1.50 (the strike price) despite the price being above $1.50 on the market. But if the price of $GEM is less than $1.50, then the option is worthless because you would be able to buy $GEM for cheaper on the market.
By offering rewards in $GEM call options, we ensure that the reward recipients are themselves long on $GEM and invested in the future success of the platform. This is a great way to utilise $GEM in the treasury without selling on the market.
The decentralised nature of Hedgey Finance and the flexibility of its options products also means that, with the right parameters, you can use at-the-money call options as a p2p OTC desk. This means that people can use the Hedgey Finance platform to perform p2p trades on larger amounts of $GEM or $SHELL at market or near-market prices without impacting PCS prices, since these trades would not be going through PCS liquidity.
Going beyond an innovative way to incentivise team members and advisors and to trade $GEM and $SHELL OTC, we are also exploring the potential for Hedgey call options to be directly integrated into the Bank as a secondary form of investing, as distinct from yield farming. This means that community members will also have more investing choices at Clam Island Bank.
The availability of call options on the native token as an integrated and seamless secondary investment option is something that we do not believe any other yield farm has attempted, and we are excited to be working with Hedgey to make this possible.