With DeFi continuing to move at the speed of light, it becomes practically impossible to keep track of all the new DeFi projects that seem to keep popping up every day. On top of this, it is even harder to spot something valuable in the early stages of development - which is always the best time to get involved for maximum gains.
Today, I would like to present 2 projects that I feel have the potential to become extremely valuable after my initial in-depth scans.
Hegic is an on-chain options trading protocol that allows users to buy ETH and WTBTC put and call options to initiate risk management trades. The trades are provided by liquidity providers (known as writers) who deposit liquidity into the pools.
Hegic has witnessed quite a shaky past but managed to overcome these obstacles with its reputation still intact. The protocol was designed by an anonymous developer who goes by the name of Molly Wintermute. The first-ever mention of Hegic appeared on January 29th, 2020 in the following Tweet;
Wintermute would then go on to release the first version of Hegic on February 20, 2020. Unfortunately, after releasing the protocol, Wintermute noticed there was a bug in her smart contract code which led to the loss of around $48,000 being locked into the smart contract to be forever lost. Luckily, she was able to rectify her error by providing a 100% refund to those who lost any funds;
It's worth highlighting that it was Molly herself that discovered the bug and fixed it. It wasn't an external type of hack or exploit.
She would then go on to re-release the protocol a few weeks later in May 2020 with all bugs patched. This time, the smart contract was audited shortly after the new protocol was released.
Although not too much is known about Molly Wintermute herself (we aren’t even sure if she is male or female), she does have some common alignments with the legendary Andre Cronje (the developer of YFI).
How was the HEGIC token was distributed?
The HEGIC token itself was announced on August 12th, 2020. Like most DeFi protocols, the token is mainly used for on-chain governance. On top of this, it is also used for the distribution of settlement fees, hedge contact discounts, and priority unlocks for liquidity providers.
The token launched on September 9th, 2020 with a total fixed supply of 3 billion. The token distribution was as follows;
- 20% went early contributors - 602.4M HEGIC
These users acquitted HEGIC while it was still in its early stages. 25% of these tokens were unlocked on Day 11 with the rest being vested over an 18-month period with HEGIC being unlocked on a monthly basis.
- 10% was allocated to the Hegic Development Fund - 301.2M HEGIC
Used to support long term development of the protocol. 25% of this was unlocked on Day 1 with the rest being in a 36-month vested period.
- 40% was allocated to Liquidity mining rewards - 1.2B HEGIC
80% of this is allocated to Liquidity Providers with the other 20% going to option holders. These are to be distributed over a course of three years.
- 25% went to the Bonding Curve - 753M HEGIC
This was the main liquidity venue for HEGIC during the first 4 weeks after launching.
- 5% went to the Balancer Pool - 150.6M HEGIC
Designed to boost HEGIC pool on Balancer.
Why should you pay attention to Hegic?
Hegic provides a novel way of trading options in a totally decentralized manner. There aren’t any other DeFi protocols that allow you to trade decentralized cryptocurrency options without having to sign up for a particular exchange and providing KYC details. We are still in the very early stages of DeFi and new branches that already exist in Traditional Finance (TradFi) are being developed.
The HEGIC token has now been out for a period of around 2-months. Over that time, the price for HEGIC remained beneath the $0.15 level until the second week of November 2020. It has since pushed further higher to trade at around $0.23 toward mid-November. This has caused the market cap for HEGIC to increase to $71.4 million - putting it in the 123rd position in the market cap rankings.
Although most would agree that this is not early days for HEGIC anymore, we are still at the very beginning of the lifecycle for a DeFi where tools and products from TradFi emerge.
2. Saffron Finance
Saffron Finance is a protocol designed to promote liquidity mining that provides farmers with different levels of risk exposure and yields. The protocol was developed by anonymous developers and was first announced on October 21st, 2020, with the following Tweet;
The team would then provide their official introduction to Saffron Finance on Medium on October 31st, 2020, and would begin the first epoch (Epoch 0) for liquidity mining their SFI token on November 1st, 2020;
The token was just listed on Uniswap on November 16th, 2020 after the first SFI were minted from Epoch 0 which lasted 14 days.
How was the SFI token was distributed?
Spice (SFI) is the token behind the Saffron Finance protocol and the total amount of SFI coins is hard-capped at 100,000 SFI.
There was no pre-sale for SFI - it can only be minted by providing liquidity to the protocol itself. The tokens are provided as a subsidy for liquidity providers and are awarded via liquidity mining.
The first batch of 40,000 SFI was minted on November 15th and they were distributed across liquidity providers that provided DAI to the protocol for 2 weeks in the first epoch. Of these 40,000 SFI tokens, 10,000 SFI (25%) went to the team.
SFI will continue to be minted in this manner throughout each epoch that lasts 2-weeks in total. After every epoch, the emission is halved. This means that in Epoch 1 (Epoch 0 was the first), only 20,000 SFI will be minted - 25% of which will be awarded to the team again. In Epoch 2, only 10,000 SFI will be minted.
This trend will continue until Epoch 8 (which is approx 4 months from now) , at which point, the halving discontinues and SFI are continued to be minted at the rate of 200 SFI per Epoch until the 100,000 cap is reached.
Why should you pay attention to Saffron Finance?
The important thing about Saffron Finance is the fact that it allows its users to customize the level of risk they would like to input into the protocol depending on their own appetite through their different products. It's another platform for liquidity providers who play vital role in DeFi ecosystems.
Saffron Finance’s products are A and AA tranches, which LP's can buy to customize their future revenue. The A Tranche is the highest-earning tranche but also the riskiest. If there is an attack on the protocol - your funds are at risk. Their AA tranche is much less risky but you remain protected in the event of an attack on the protocol.
We are still in the very early days for SFI - especially when we consider the first batch of tokens were only just minted. More will be minted in 14-days after the next epoch ends but the price discovery has just started. Note that there will be just 100K tokens out there (unlike, say, Bitcoin's 21M) so don't let the current price of SFI scare you.
Currently, the market cap for Saffron Finance is "just" $5M - putting it on the 6th-page in the market cap rankings.