According to Chainalysis, DeFi transaction volume grew 912 percent in 2021. … From 2020 to 2019, there was a 516 percent spike in cryptocurrency theft, resulting in $3.2 billion being stolen. 72 percent of the stolen funds came from DeFi protocols. Scams cost cryptocurrency holders $7.8 billion in losses, up 82 percent.
This article is a bit older, but it has a great breakdown of Hegic’s potential.
Hegic provides good mobility, which its predecessors failed to achieve. Through Hegic, investors are finally able to take advantage of all the advantages of decentralized option trading to provide strong liquidity for ETH and WBTC’s sell option rights and buy options.
Since its launch, Hegic has attracted more than $66 million in TVL and created considerable transaction volume.
In the two years of the Chinese New Year, the trading volume of centralized crypto option platforms has increased tenfold. Both centralized and decentralized platforms will continue to grow.
As a leader in DeFi options trading, Hegic has the potential to develop from an early product to a mature DeFi platform.
The direct beneficiaries of this evolution will be the holders of HEGIC (Hegic’s native token). They will get 1% of each option amount to pledge tokens.
Stakers realized that if Hegic reaches a transaction volume similar to that of its centralized rival Deribit, it will become a money-making machine.
Given the attractiveness of the current market, little competition, and ever-increasing transaction volume, Hegic has everything it needs to become Uniswap in the DeFi field.
Market opportunity
Options are derivatives based on the value of underlying securities (such as stocks).
In the traditional financial sector, the options market is a trillion-dollar industry. Professional investors often use them for various hedging purposes. For example, with options, investors may want to hedge against a falling stock market to limit downside losses.
In the field of cryptocurrency, options are also rapidly gaining popularity. According to data from Skew.com, the volume of options trading on centralized platforms has been increasing substantially since 2018.
In the past two years, transaction volume has grown from almost zero to nearly $6 billion.
This shows that the potential of blockchain options continues to grow, creating opportunities for DeFi investors.
In the current market, Hegic has two competitors: centralization and decentralization.
Centralized competitors have been leading the way for two years. During this period, their platform attracted a large number of investors and trading volume.
Currently, the largest centralized participant in this field is Deribit. On a centralized platform, it accounts for more than 80% of all capacity. Other centralized participants, such as CME, OKex and Huobi, have much smaller monthly transactions.
However, although centralized participants are ahead of decentralized participants, the trend of decentralization seems to only intensify. Moreover, in the long run, centralized participants will be left behind.
This year is already the year of DeFi. Recently, the total value locked in DeFi smart contracts reached an all-time high of $14.4 billion.
Uniswap is an innovative trading platform without a traditional order book, and its trading volume surpasses Coinbase, the world’s largest Western exchange.
Investors (including option investors) may continue to migrate from centralized platforms to decentralized platforms because they provide many benefits. They do not need to escrow funds, nor do they need any registration, AML or KYC. Investors only interact with smart contracts and there is no other intermediary.
These benefits are particularly important because the regulatory agencies in the United States and China will review and lock centralized cryptocurrency exchanges.
Here are some recent news:
- CFTC and FBI documents allege that BitMEX caused the price of Bitcoin to plummet.
- The founder of OKEx was detained by the police and all withdrawals were suspended.
- Data shows that the outflow of funds from Huobi Exchange has increased, and the company denied the rumors that the executives were arrested.
In view of the above incidents, Deribit also announced that it will strengthen KYC requirements before the end of 2020, which means that all US options investors will have to leave This platform, because the United States is one of the restricted countries.
For Hegic, this news is extremely favorable, because American investors may begin to explore alternatives to decentralization. With its deep liquidity, Hegic may become an excellent alternative to Deribit.
In the decentralized competition, some players started earlier than Hegic, but did not achieve comparable results.
At present, one of the oldest options trading decentralized platforms is Opyn. It provides various options trading possibilities. However, it lacks the liquidity needed by traders. Since its launch, Opyn has been facing liquidity issues, and the current TVL is only $300,000.
Several other decentralized platforms are seeking to enter the market. However, none of these platforms adopted Hegic’s “liquidity first” strategy.
So, at least in the near future, Hegic seems to dominate the DeFi options market. This may help the project obtain the necessary network effects and competitive advantages to successfully cope with increasing competition.
From the perspective of market opportunities, Hegic is currently the leader in the decentralized options market. This platform has everything needed to succeed. Therefore, it has a score of 8.7 in the part of the market opportunity.
Basic technology
Like Like all DeFi dApps on the market, Hegic is a set of smart contracts on the Ethereum blockchain. These smart contracts support the system and help its normal operation.
There are three types of stakeholders in the Hegic ecosystem: option traders, liquidity providers and Hegic token holders.
For option traders, Hegic has a relatively simple interface. Traders can choose between WBTC and ETH to be bullish and bearish.
On the one hand, options give the holder the right to buy or sell assets at a specific price. On the other hand, options give the seller the obligation to buy or sell assets in a specific period.
The difference between Hegic and other options trading platforms is that it does not have a standard order book, which requires an option seller.
Usually, the option trading platform operates with a regular order book, one side is the buyer and the other side is the seller.
Hegic took a fundamentally different approach here. The project did not try to match buyers and sellers, but adopted an experimental two-way pool model in which liquidity providers became option sellers by staking their ETH and WBTC together.
It helps to achieve maximum liquidity for option buyers.
In Hegic’s ecosystem, liquidity providers benefit from the fact that the risk of selling options is transferred from a specific person to the entire liquidity provider By. They can also get the return on selling options and the premium paid by option buyers.
In theory, these returns should be higher in the long run, and most options usually expire.
However, returns may be negative in the short term, especially during periods of high volatility.
As shown in the figure, the liquidity providers of the WBTC and ETH liquidity pools currently have negative returns on WBTC stakers and ETH stakers of -5.52% respectively And -1.6%.
However, liquidity providers will also receive HEGIC tokens, so compared with HEGIC’s return, the losses they bear in providing liquidity It’s not too big.
However, if you want to be one of the platform’s liquidity providers, please keep this in mind.
In addition to investors on the Hegic platform, there are also Hegic token holders. Token holders holding Hegic pledge will receive 1% of each option amount. In other words, 1% of all transaction volume goes to HEGIC stakeholders.
It has created a very healthy token economy, and users have an incentive to invest in tokens, not speculation.
From a security perspective, although the platform has undergone several audits, it is still in the testing phase and may be vulnerable to different attacks. DeFi is still a high-risk environment. Recent hacking shows that security audits are of no avail.
Therefore, users should remember that this is a highly experimental project, and in many cases, they may lose all their funds.
In fact, due to a loophole in the Hegic smart contract earlier this year, user funds worth $28,000 were permanently locked.
Although the team compensates for the lost funds, there is no guarantee that there will be no other undiscovered bugs or smart contract vulnerabilities.
In general, from a technical point of view, Hegic presents a very elegant and innovative concept. However, from a security perspective, the project still has risks. Therefore, we give Hegic a score of7.5in this section.
Ecosystem development
Hegic was only launched 2 years back, but its ecosystem is developing rapidly. The total locked value of the smart contract of the project has now exceeded $66 million, making Hegic the largest platform for decentralized options trading.
The cumulative option trading volume of WBTC and ETH is approximately $82 million. Since Hegic has just been online for a month, the transaction volume is quite good. As more and more people learn about the platform, usage and transaction volume will further increase.
Since its launch, there are currently more than 800 users and the current transaction volume exceeds 1,850. For investors, ETH options are more popular than WBTC options.
From a digital point of view, Hegic has an excellent appeal from the beginning, and some key figures in the DeFi field have also noticed its strong foundation.
The insurance agreement Nexus Mutual recently added support for Hegic to its platform. Therefore, in the Hegic WBTC or ETH liquidity pool hacking incident, users who have already purchased insurance on Nexus Mutual will be able to make up for their losses.
Currently, the NXM insurance cost for Hegic is only 2.0% per year, which means that NXM token holders are very aware of the security of these contracts confidence. Therefore, Nexus Mutual provides a good choice for liquidity providers who need additional protection.
Looking forward, Hegic plans to integrate more and build new features for the product.
For example, @jmonteer23 has started to establish a secondary market for Hegic options. It will increase the liquidity of options and make the platform more attractive to investors.
In general, in just one month, Hegic has completed many projects that have been impossible for many years. The project has a very attractive ecosystem with good growth potential. Therefore, the score for the ecosystem part is 7.6 points .
Token Economics
The project has a very powerful token economics. Coin holders can directly benefit from the success of the platform.
The total fixed supply of the project is 3,012,009,888 HEGIC tokens. According to the team’s data, the current circulating supply is about 130 million HEGIC. Within two to three years, all tokens will be unlocked, which means that inflation will be relatively high during this time.
According to the current price (each HEGIC price is US$0.27), the fully diluted market value is US$824 million.
On the supply side, tokens will be unlocked for the team, early contributors and liquidity providers.
However, it’s important to remember that HEGIC token holders have good investment incentives if the platform continues along the same path Development, they are unlikely to sell HEGIC on the market.
As we mentioned in the special report, this project may be one of the few projects whose fully diluted market value will not significantly affect the value of the token. One.
Users holding Hegic tokens can get 1% of each option amount in ETH and WBTC.
Tokens can be traded in batches; each batch contains 888,000 HEGICs. There are up to 3000 in total. These shares accounted for 88.5% of the total supply.
If we see Hegic achieve similar transaction volume to Deribit, most of the tokens may be pledged due to the platform’s fees.
In October, Deribit processed $5.2 billion in transactions. If Hegic can achieve similar results, it will bring in $52 million (1% of $5.2 billion) in monthly income for 3,000 holders, which is $17,333 each, or $207,996 per year. Such a return will give the pledger a large amount of valuable assets.
Current token holders have realized this potential and pledged their tokens on large bets.
Since the platform went live, the number of bets has been growing rapidly. There are currently approximately 119 bets, representing 105,672,000 locked HEGIC tokens, accounting for 80% of the total supply.
Share trading has already obtained substantial returns for its ETH and WBTC holders.
Since the agreement was released, these 119 equity holders have earned US$822,000 (approximately US$6,900 per horse). With all factors remaining constant, the annualized rate of return is approximately 23%.
Looking forward, assuming that the trading volume of the platform will continue to grow, HEGIC may become a valuable asset, not only in the value of price increase, but also Bring huge monthly returns to its token holders.
Because of these Factors, Hegic’s token economics got a score of 9.0 .
Hegic’s team
Hegic is one of the few projects in this field developed by anonymous founders and has received a lot of praise from the crypto community.
Usually, it is difficult for anonymous founders to attract funds and trust from the community, but as we explained in the report, Hegic is the opposite.
However, anonymous founders have both advantages and disadvantages.
One of the disadvantages of this protocol is that users can never be sure that there is no backdoor in the code, and their funds will not disappear. These concerns are reasonable for any project, but when you see who the founders are, at least you can trust their credibility.
One of the benefits involves legal issues. Hegic’s team can use their platform to do whatever they want, without worrying about the SEC or any other legal entity shutting it down.
Many external developers also have a clear interest in Hegic. Several independent developers have begun to develop products for Hegic. Some projects are seeking to integrate with it.
Therefore, Hegic’s team score is 6.7 points .
Road map
Hegic provided a very detailed roadmap and plans to achieve its goals in the coming months.
In November, we should see more integration. In addition, two independent developers will build additional features for the protocol.
As mentioned earlier, @jmonteer23 will build functions for the Hegic option secondary market.
Another developer @ 8baller will use the Fetch.ai autonomous agent to build the Autonomous Hegician application. To date, options worth more than $2 million have expired (because Hegic options must be exercised, which means that the holders of these options have suffered losses). This application should solve this problem for option traders.
In December, the project plans to launch some other basic functions, such as community trading functions, so that users can carry out copy transactions. This helps increase transaction volume.
The project will also launch an automatic hedging strategy for liquidity providers to protect their funds from downside risks.
In addition, Hegic plans to integrate Chainlink’s implied volatility data sources, which will help provide better prices for option traders.
In general, the project has a very healthy and strong roadmap in the coming months. Therefore, the score for the roadmap section is 7.5 .
Token performance
Since the beginning of the transaction, Hegic has shown positive token dynamics, and the token price has been rising. This growth can be attributed to the overall positive influence of the market and the increasing number of pledgers.
Many holders of Hegic tokens are more willing to pledge the tokens rather than put them in their wallets. As mentioned above, pledge will bring you rich returns.
Hegic has attracted a lot of attention in the DeFi field.
As prices rise, transaction volume has been increasing, which shows that the project has attracted great interest from the crypto community.
The growth of the Internet also shows a positive trend. The number of new accounts created every day varies from 80 to 300.
Overall In other words, the growth prospects of HEGIC tokens are very optimistic. It has not been listed on any established centralized exchange, and users may continue to stake.
So it has everything needed to continue to appreciate. Therefore, the project’s score in the token performance section is 8.0 .
Conclusion
In traditional finance, options It is a huge market. In the field of cryptocurrency, this market is growing rapidly. In the next five years, we expect that the volume of cryptocurrency options trading on centralized and decentralized platforms will continue to grow.
However, over time, investors may prefer decentralized platforms because they do not require any KYC or custody of your funds .
Hegic has a great opportunity here. It has a very good product that has been used by many suppliers in the field. As more and more investors join the cryptocurrency ecosystem, they may choose Hegic for option trading.
It also has nearly perfect token economics, because token holders will be greatly incentivized to pledge their tokens and let them be taken away from circulation.
These factors should help us enter the next bull market cycle when the project development. Therefore, Hegic’s overall score is B + .
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