Long-waited update of Moret
It seems a million years have passed since the launch of Moret platform (actually, only three months ago!). The market volatility dominates the twitter space and the DeFi world seems to be going through a rough time marked by the demise of Terra’s UST. The all-powerful Fed Chair Powell has pulled the strings of interest rates which affects the crypto market dearly. With the prospect of a ‘hard-landing’, the demise of Luna and the ‘de-pegging’ scares of other stable coins, not least USDT, it looks pretty darn armageddon to a lot of people.
But is it? I don’t think so. The demand for DeFi could only go higher. It is the time for crypto options to play an ever more prominent role in everyone’s crypto portfolios by providing down-side protection and leveraged exposures when the market rebounds. Forget about IDOs in this rate hike cycle. Options are one of the best ways to profit from the DeFi ecosystem now.
Thus it is time to announce the upcoming upgrade of the Moret platform in June, which aims to meet the increasing demand of DeFi option trading from both retail and institutional investors.
Auto-hedged liquidity pool is the first main feature of the upgrade. In the original Moret, the liquidity pool acts as market makers for both buy and sell sides of crypto options. A hedging bot is involved to hedge residual beta via trading on 1inch and Aave exchanges. For example, if there is positive exposure to Ethereum prices of aggregate ETH option Delta positions, the bot will buy wrapped ETH tokens with USDC on 1inch. If the exposure is negative, for example when there are more call option sellers than buyers, the bot will borrow wrapped ETH from Aave, creating short positions. However, investors in liquidity pool demands variety of hedging strategies and their interests should be aligned with the choice of the strategies. Therefore, the upgrade allows market makers to create pools that a single specific bot or smart contract is allowed to initiate the transaction with 1inch or Aave. The creator of a liquidity pool acts as the manager for the hedging bot, while investors in the liquidity pool share the returns from the pool.
Governance with DeFi 2.0 characteristics is the second major feature of Moret upgrade. There are two types of governance structures: protocol governance with Moret tokens, and pool governance with its pool tokens. Moret token holders can decide the maintenance fees charged on each in-the-money option pay-out. Also, they can vote on the exchanges allowed for hedging trades, change oracles for volatilities and add volatility tokens. What’s special about Moret token is that, similar to DeFi 2.0, liquidity pool tokens can be exchanged with newly-minted Moret tokens, as long as the pool has a net capital over a threshold, currently set at $1 million. This allows liquidity pool tokens to yield based on the entire option platform.
On the pool level governance, the liquidity pool holders can decide on fees payable to the exercising bots, and also the shape of the volatility AMM curve.
Volatility trading is further enhanced in this upgrade on the robustness and capital security. Previously, the whole platform mints volatility tokens with the USDC cost stored on smart contract. The saved capital pays the cost to the liquidity pools when volatility tokens are exchanged for option contracts. There is risk where too much USDC is extracted from the smart contract when volatility is high. To solve this problem, every volatility token now becomes its own capital pool so it’s segregated from other volatility tokens. In addition, for any purchase of the volatility token, a floor price at the average capital (USDC per volatility token) is applied. Similarly, a cap price limits how much USDC is transferred when the volatility token is used in purchasing options.
As liquidity pool takes in USDC from volatility tokens when they are exchanged for options, the line of defence against abnormally low USDC transfer is the minimum volatility level that the pool can accept for volatility token as premium payment.
Interface — a brand new web interface will replace the existing version where option trading, market making, volatility trading and governance will be smoothly incorporated.
We are aiming to launch the new upgrade in late June. Please follow our Telegram and Twitter channels if you’d like to keep updated: @moret_io