Chromia Incubates DeFi project Hedget Decentralized Protocol for Options Trading

Chromia Incubates DeFi project Hedget Decentralized Protocol for Options Trading

The Chromia team is proud to announce the launch of the Hedget project, a new and critical layer towards scaling the global DeFi ecosystem. Hedget believes that option products are a necessary building block for the decentralized finance sector to grow and mature. The Hedget Foundation will issue the HGET token as the native token for both governance and utility purposes.

Hedget is a decentralised protocol for options trading. Through the use of collateral, investors can create and trade different option products on-chain. Decentralised option products permit users to hedge price fluctuation and also the risk in their collateralised lending positions.The protocol also adds in support on Layer 2, using the Chromia blockchain, to enable faster and cheaper transactions.

The Hedget team is led by Malcolm Lerider who will serve as CEO of the Foundation. Malcolm was previously a Senior R&D manager with NEO and currently leads China efforts for the Chromia blockchain team.

Why is Chromia a perfect fit for decentralized options trading?

Ethereum is currently running at capacity and it has become prohibitively expensive to process transactions on the network. Just three months ago the price of gas was 10 GWei. Today it's 70 GWei. Simple transactions incur just a $0.35 fee, but a more sophisticated contract call which requires more network resources could be as high as a $1 and this becomes cost prohibitive. Thought leaders, such as Vitalik Buterin, have advocated for L2 solutions to address these network economic limitations.

In line with these recommendations, the Hedget design will allocate only settlements to the Ethereum chain and will perform all trading on Chromia. So Chromia is essentially the L2 for Ethereum to minimize costly transactions on the network. This model is extensible to other blockchains in the future.

Let’s compare the use of option contracts under the current and proposed scenarios.

Suppose Alice wants to sell call options on Ethereum today. If we represent each contract as a distinct ERC-20 contract, first she will need to deploy 20 different ERC-20 contracts. And then Alice would need to make at least 40 transactions to work with the 20 different options contracts.

What about the Chromia solution? In the case of using Chromia as L2, Alice will need to deposit & lock her funds only once, and then she can create many different options with different strike prices and expiration dates. If the contracts she sold are not exercised, she can reuse her funds to create more contracts. So Alice might be able to sell 20 different option contract types for the cost of just a single Ethereum transaction. Thanks to the robust features of Chromia, Hedget will operate in a fully decentralized manner and will have all great benefits of centralized exchanges including a user-friendly UI, a single sign-on (SSO), the ability to query transactions, etc.

About the HGET token

The HGET token is a 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.

The token will have two major functions at the start. Firstly it will serve as a governance token of the HGET DAO to fund setup transaction fees, assets reserves, and general functions and features of the platform. Secondly it will be used to prevent spamming of orders which can lead to API overloads and orderbook manipulations. To prevent this, some amount of HGET tokens will need to be staked, The greater the activity, the more tokens should be staked.

What does it mean for the CHR holders token?

Hedget will be deployed on the Chromia Mainnet, boosting the use of Chromia and scaling the ecosystem. That means using CHR to rent resources and, in the future, Hedget tokens can be transacted with other DeFi dapps built on Chromia.

Secondly, the Hedget Foundation will use CHR token in a public sale of HGET to prevent bots from outrunning regular buyers. Staking CHR will be needed to participate in a public token sale which will be in the form of an auction.