Thank you to the NanoNews Community for participating in Ask Me Anything (AMA) with Hedget September 5, 2020. This guest star Malcolm Lerider, Co-Founder. If you were unable to join the live AMA, no worries, here comes our 57th AMA recap!
We are glad to meet here:
Malcolm Lerider, Co Founder Hedget
For taking your time out from busy schedule for the AMA!
Introduction Session
Q1: Can you introduce yourself to the community? What is your background and how did you join Hedget?
Hi everyone, I’m Malcolm, co-founder of Hedget. I ran the R&D at NEO back in 2017 and worked on global blockchain projects at PwC. 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 perspectives. We now have a very exciting project to prove what Chromia actually can do, and it’s called Hedget
Q2: Can you briefly describe what is Hedget?
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 behavior”, we want to offer the exact opposite — a possibility to remove risk in a decentralized manner. So our values are aligned around eliminating risk in crypto. It’s like basic insurance for very volatile crypto markets.
Q3: What companies/projects do you see as competitors, and how does Hedget stand out compared to them?
There are a handful of other projects just starting, and most of them are directly on Ethereum without layer 2. It’s a bit problematic when it comes to trading, as fees and transaction speed is a limitation, especially when everyone are going fomo on food tokens. Hedget is using Ethereum only for collateral, and the option trading is on Chromia as layer 2. This means that options can be traded as normal even when there are too many sushi, hotdog, springrolls and whatnot.
Q4. What is the use-case of the Hedget?
It’s a platform for decentralized option trading, as explained in Q2.
As for the HGET token, it is the native utility and governance token of the Hedget platform. It will be issued on the Ethereum network as an ERC-20 contract and will have representation on a Chromia sidechain.
Effective immediately upon launch, HGET will serve as the governance token of the HGET platform. In the preliminary stages, the token holders can vote on adding new assets, default options parameters and UI improvements.
Before the platform is launched with real assets there will be a Testnet platform (hosted on both Chromia and Ethereum testnets) to participate on which users need to stake HGET to access. Users will trade funds that have little to no real value, but the best performing traders will be rewarded automatically by Hedget protocol with HGET tokens upon mainnet release.
When the platform migrates to Mainnet, HGET will be used to prevent spamming of orders which can lead to API overloads and order book manipulation. HGET tokens will need to be staked to interact with the platform. Staking requirements will increase as the monetary value and frequency of a user’s interactions increase.
As the platform is further developed, a DAO will be established and HGET tokens will be used to determine transaction fees, reserve requirements, and general functions and features of the platform.
Lastly, the HGET token will be used as a security measure and reputation engine in the future when margined options are implemented. Options writers who wish to offer options without providing 1:1 collateral will need to stake HGET tokens which will be used to purchase fully collateralized options as a hedge in case of Capital insufficiency risk. This mechanism ensures end users cannot be adversely affected by the insolvency of an options writer.
Q5. What are the major milestones Hedget achieved so far & what are in future pipeline?
Hedget is currently in the KYC process and the token auction starts next week. Anyone who would like to join should go through the KYC process at www.hedget.com
This is a novel way of releasing a token and we think it is a more fair and transparent way. An overview can be found on Medium, and more details are to be released soon.
https://medium.com/hedget/your-guide-to-the-hedget-token-auction-a1169e97032e
We are also wrapping up the prototype, which will be a first look into Hedget protocol. The options platform itself is expected to launch on Ethereum Testnet in about two months.
We believe that the crypto options market will have a similar boom as leveraged trading had a few years back. BitMex rode the wave, did it well, and became market leaders. If we are right about options markets starting to boost, then we are going to grab this opportunity as early participants to become market leaders.
As for connection with exchanges, we are first looking at lending protocols, and will move to other market opportunities after that.
We want Hedget to have largest market share among all decentralized option platforms.
Twitter Session
Q1: Hedget aims to remove risk of crypto in decenralized manner. This sounds interesting and amazing, could you tell us the methodology Hedget adopts in making this actually possible in reality?
Hedget is the protocol, let’s say underlying platform, for options writing and trading. It’s all peer-to-peer. Anyone with crypto assets that want to mitigate risk of sudden price movements by buying options, sort of “freezing” the price so that you can settle in the future for that price regardless of market price.
Buying options will require to pay a premium, but Hedget do not decide price; option writers do, as it is all peer-to-peer. With focus on liquidity, this should lead to lowest prices. We aim to have very low taker fees, while the maker is actually getting rewarded from the liquidity mining pool by writing and selling options.
Q2: Explain more about your partnership with CHROMIA, how Does this Enable Chromia to launch fully into the DeFi space and how do you deal with the The Chromia Relational Blockchain and RELL programming?
Chromia is incubating this project, so we get a lot of assistance with development and connections. It gives us much shorter time to market.
Furthermore, by chooseing Chromia as technical solution for layer 2 makes is super easy to create API’s, so other DeFi protocols will be able to easily integrate with Hedget to build out DeFi ecosystem together.
Q3: In the near future, Hedget will auction under the convergence auction mechanism. Can you explain and give a simple example of this converged auction mechanism?
It is similar to public sale, but hopefully with a more fair price discovery. Instead of setting exchange rate in advance, the community will decide the exchange rate for HGET token by an open auction. All bids will be public, so the threshold bid for receiving the token will be known to all participants at all times. This makes it transparent to users in the sense that they don’t have to pay more than the threshold if their bid is high, and have the alternative to drop out or increase their bid if they are under the threshold.
Q4: What is Hedget’s governance mechanism like? Who has the right to participate in the voting process? What are the requirements to participate?
Anyone with HGET tokens can choose to stake them to participate in governance. Governance will gradually cover more and more aspects of the platform, to transform into a DAO. At the start, things like fees and what next chain to integrate for collateral support will be open for governance staked tokens to decide.
Q5: What is the main product and services of Hedget that you are focusing to? Are there any limitation of target market you are trying to pursue or you are open to a wide variety of market? What strategy you are making for future adoption of users in your platform?
Platform for decentralized options is our main product, together with a wide range of API’s to make it easy to integrate and also make it easy for institutional investors and hedge funds to implement more advanced hedging strategies.
Other than institutional investors and hedge funds, we focus strongly on DeFi lending protocols and other protocols where the user have a risk of liquidation, as these can be saved from insolvency by purchasing options in advance. Once we have our API suite ready, we also want to integrate with exchanges, both decentralized and centralized, to give retail users the same safeguard.
To sum it up, we are focusing on liquidity. It’s a self-feeding mechanism; liquidity brings even more liquidity, as this is what users need. We have a few approaches in parallel to onboard the liquidity we need.
Live AMA
Q1. Why is HEDGET using Chromia-based blockchain Dapps to handle multiple tasks via Ethereum smart contracts? Can you explain what liquidity mining is on the Hetget platform? How do I join?
Ethereum is very established as the most used platform for digital assets. This makes it a good first choice for collateral and settling options at expiry. Ethereum is however not very user friendly when it comes to time sensitive transactions, as we have seen with yield farming. This is why we use Chromia as layer two, so that option trading can be done close to the performance of centralized solutions, and without being affected by transaction spikes on Ethereum.
Anyone who write and sell options will automatically be part of liquidity mining; these are rewarded with HGET tokens instead of paying a fee. We will also have an automatic market maker that users can participate in; it will provide liquidity to options while the users putting up collateral will take part in the HGET rewards
Q2. HEDGET TOKEN is considered to be an ERC20, then how will you solve the issue of high gas price and congested network issue?
As mentioned in previous answer, Hedget only uses Ethereum for collateral and settlement. So while it is true that these depend on Ethereum limitations, these are not time sensitive operations and one could easily opt for paying lower fee. All time sensitive operations are on Chromia layer 2.
Q3. In the case of using Chromia as L2 , what problem will it solve of Ethereum ? What happen when the contracts for sale are not fulfilled ? How does Hedget apply Chromia Layer 2 to works in a completely decentralized manner ?
This is a good question; if the options are not sold or if they are not exercised at expiry, then the option writer can reuse the same collateral to write new options. Option writer do not need to make any new transactions or pay any new fees on Ethereum.
Chromia L2 is of nature less decentralized as it runs of fewer nodes for better performance. Blockchain characteristics are all there though; all transactions can be verified by running a node. Asset ownership, which perhaps is the biggest argument for “more” decentralization, is kept on Ethereum.
Q4. 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???
At start, Hedget will have European style options with expiry dates once a week, so that’s the timeframe you will be able to work with. The price will be set by option writers and not by Hedget, so it should by market alone go towards the market rate for risk
Q5. How HEDGET handle the orderbook Manipulation? The Whitepaper paper says that 20% of the total supply are destined to “Reserve” but i have curiosity, reverse to what? Can you tell me an example of use of those funds?
It is all open for everyone to see on chain data
The DAO will decide how to use this allocation. It is locked for 2 years, so it is completely out circulation for that time. When unlocked, tokens that are staked for DAO governance can decide how these shall be used, for example add it to liquidity mining or re-lock it for future use.
Q6. DeFi has been a very popular movement in crypto, does Hedget have any plans to integrate this into your ecosystem?
Yes, DeFi is the very reason we are building this. The Chromia team did first investigate how to improve lending protocols, and a cornerstone for that is decentralized options. This is when we found out that there isn’t a single decentralized option platform that satisfied our needs. So we build it 😉
Q7. What did you mean with “Advanced querying”? Why blockchain hard to do this and why Hedget adopt this method?
It is very difficult and expensive to request specific data from blockchain, let’s say specific states at specific time points. One often have to replay the whole blockchain history to get specific information. The same goes for updates, if you are to update a lot of data on Ethereum for example, then it’s expensive.
Hedget uses Chromia as layer 2 as mentioned before. Chromia is “relational database”, to put it a bit simpler, it is an SQL database wrapped in blockchain. This means that common database operations are used in the same way on Chromia. Developer’s don’t even need to think in terms of “smart contract”; they build dapps the same way as they would build normal applications on a computer. This is why Hedget can do what I call “advanced querying”; Hedget can fetch and update data in the same way as a relational database.
Q8. Due to the rise in Ethereum’s transaction fees, has the team thought about switching to another blockchain?（Which cross-chain solutions HEDGET will use? Why HEDGET choose to build on Ethereum first?)
Ethereum is important as there are many assets there that people will want to write options on. We will not switch, but we will add support for more blockchains that also connects to the same Hedget platform.
We are already being pushed by hedge funds to implement native BTC as soon as we possibly can, as they have a big demand for this, so we are of course already looking at this as potential second chain to support. Other than that, it is likely that HGET governance stakes will decide which chain to support next
Q9. It is known that Hadget is invested by TOP VC in Asia such as NGC and FBG Capital. Was this one of the advantages that helped Hedget grow today?
NGC and FBG have helped a lot with connections. Thanks to them, we have expanded our connections to other funds and investors that are potential users on Hedget platform. We already received a lot of valuable feedback on what they need for their trading strategies, and we adjust our priorities to make sure that we are building a platform that the users want. As an example, this is one of the reasons why we put so much focus on an extensive API suite; they need it.
Website: https://www.hedget.com
Twitter: https://twitter.com/Team_Hedget/
Telegram: https://t.me/hedgetchat
Medium Blog: https://medium.com/@hedget
Hedget Whitepaper: https://hedget.com/whitepaper.html
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