Degis recently announced an innovative collaboration with Avalaunch — IDO Price Protection.
Degis is the 1st DeFi insurance protocol on Avalanche, and it offers a suite of DeFi services, including price protection, staking & mining, a treasury box lottery, burn vault and NFTs.
For the purposes of this article, we will focus on a specific Degis scenario — providing IDO Price Protection for the upcoming Avalaunch Dragon Crypto (DCAR) sale.
Insuring My Avalaunch DCAR Allocation:
Degis provides IDO Price Protection via a separate tradable token that pays out USDC to holders, according to the following conditions:
- The market price for the IDO token has fallen below a certain strike price
- This market price is calculated by settlement criteria on a specific date
For IDO price protection, the strike price will be the same as the IDO price. For the Dragon Crypto DCAR token sale, the loss protection token on Degis is called DCAR_0508.
The important terms for DCAR_0508:
- Strike Price: $0.165
- Type: Payout if lower
- Expiry: August 5th 2022
The trigger price is set equal to the IDO price, which means:
- The protection token holders will be compensated if the final token market price is lower than the IDO price on the expiry date.
To determine the final price:
- A frequent sampling method will be used to determine the final price on the expiry date.
- Starting from two days before the expiry date, the sampling process is conducted every four hours to collect the token price.
- The final price will be determined according to 12 samples in total.
In accordance with the above terms, this means that on August 5th 2022, if the trading price of DCAR is calculated to be below $0.165, then every individual DCAR_0508 token can be used to claim $1 USDC from the Degis vault.
How do I protect against loss on my specific Avalaunch allocation?
Because each DCAR_0508 token can potentially be used to claim $1 USDC it is up to you to customize the level of price protection you want.
For example, if you claimed a $200 allocation in the Avalaunch DCAR IDO, you may wish to protect against losses of up to 25% of the allocation. This amounts to $50 USDC — which means you would want to hold 50 DCAR_0508 tokens at the date of expiry.
To do this, you would buy 50 DCAR_0508 tokens from the Degis DCAR Liquidity Pool (found at https://degis.io/protection/ido -> DCAR_0508 -> Buy/Sell)
Some outcomes after expiry:
- DCAR market price is calculated at $0.15 on August 5th 2022 (below the strike price):
- DCAR_0508 holders can claim $1 USDC per token.
- You claim $50 USDC from your 50 DCAR_0508 tokens.
- In addition, your original $200 allocation is now worth less at $181.81. In total, your investment comes to $181.81 + $50 = $231.81.
In the above scenario, the payout from the Degis DCAR_0508 tokens has exceeded your portfolio losses on DCAR.
2. DCAR price is calculated at $0.33 on August 5th 2022 (above the strike price):
- DCAR_0508 holders cannot claim any insurance payout.
- The total return is the more valuable allocation ($400) minus the cost of the 50 DCAR_0508 tokens.
- The value of the tokens is determined by the Degis DCAR_0508 Liquidity Pool.
In this scenario, the portfolio gains from DCAR has rendered the claim amount moot and could not be claimed.
What can I do with my DCAR_0508 tokens before the expiry date?
- You can trade them.
If you take out insurance but believe the DCAR price will not break below the strike price before the expiry date:
- You can sell your DCAR_0508 tokens in the Degis DCAR Liquidity Pool (found at https://degis.io/protection/ido -> DCAR_0508 -> Buy/Sell)
2. You can provide liquidity in the DCAR_0508/USDC LP and harvest trading and mining rewards.
- The returns also contribute to your total insurance outcome (current emissions average ~2000 DEG/day).
- In order to stake liquidity you must provide the token pair (found at https://degis.io/protection/ido -> DCAR_0508 -> Provide) and stake the LP tokens (mining info -> DCAR_0508)
Additional details about IDO Price Protection and other Degis services:
- Introducing IDO Price Protection
- Details of IDO Price Protection
- IDO Price Update and Mining Rewards
- Income Sharing Mechanism
- Treasury Box Tutorial
- XAVA Price Protection
Avalaunch x Degis x Dragon Crypto Gaming — Livestream: