The promise of assured excessive returns with draw back safety is usually a purple flag when navigating a sea of DeFi app advertising language.
The returns are sometimes exaggerated whereas the dangers are hidden. It is easy to advertise sky-high APRs whenever you print your individual token to fund limited-time incentives.
Nevertheless, within the off-chain monetary world, one such wild beast emerges from the depths: Shark Fin notes.
DeFi app Cega Finance, a pacesetter in unique choices and structured finance merchandise, at this time launched an onchain model on Ethereum and Arbitrum.
A shark fin is a sort of structured monetary product that gives a singular risk-reward profile. These notes provide traders increased returns if the value of the underlying asset stays inside a predetermined vary. The title is derived from the form of the payoff diagram, which resembles a shark’s fin.
Supply: Cega.fi
The potential return rises sharply to a peak if the asset’s worth stays inside the vary, after which ranges off or falls as the value rises above the required threshold. This construction permits traders to learn from secure market circumstances whereas defending themselves towards vital draw back dangers.
The launch of Cega presents conservative traders an onchain model with crypto because the underlying asset.
Growth of Solana to Ethereum
Cega debuted its first 4 vaults on Solana nearly precisely two years in the past, however moved to Ethereum within the second quarter of 2023.
Learn extra: Solana possibility protocol Cega involves Ethereum
The choice to launch on the Ethereum Digital Machine (EVM) was at all times a part of Cega’s roadmap, however the collapse of FTX in November 2022 prompted Cega to speed up its plans, in keeping with co-founder Winston Zhang.
“We knew we could not wait and we wished to continue to grow,” Zhang instructed Blockworks.
Initially, the workforce thought-about increasing the crosschain through LayerZero or Wormhole, however finally determined to rent a brand new workforce of Solidity builders to rebuild on Ethereum.
“Though that was just a little slower, it presents one of the best choices for security and safety as a result of we will management the design of the sensible contracts ourselves and never need to depend on a 3rd celebration,” Zhang explains.
This transition, which lasted three to 6 months, was primarily in response to demand from large-scale traders reminiscent of DAOs, funds and high-net-worth people preferring the soundness of Ethereum.
The choice so as to add Arbitrum was pushed by its sturdy DeFi group and vital TVL, making it a super goal group for Cega’s merchandise. Arbitrum’s progress, pushed by platforms like GMX, suits in effectively with Cega’s providing, which appeals to buying and selling fans and derivatives fans.
It’s not a migration: Cega has a presence on Solana with hundreds of customers and the product shall be additional developed there.
“We’re having conversations about what it means to reprioritize the Solana ecosystem and the way we should always take into consideration product parity for a number of the new merchandise we have launched on Arbitrum. [Ethereum] mainnet,” stated Zhang.
Making complicated merchandise accessible
One of many largest challenges Cega faces is the way to simplify complicated monetary merchandise for his or her non-professional customers. They made a acutely aware effort to create intuitive visualizations and clear documentation to keep away from overwhelming customers with technical jargon.
The aim is to make this class of funding autos accessible to everybody, whatever the measurement of the funding. This class is often reserved for accredited traders within the conventional monetary world.
“The merchandise we construct are finally derivatives, however they add a number of advantages to the tip consumer that they can’t get from current [perpetual futures] platforms or vanilla possibility platforms,” Zhang stated.
The brand new ‘Shark Bull’ vaults goal customers who usually have capital on lending platforms like Aave, and wish to enhance their stablecoin returns with out taking over directional threat to the crypto markets.
These safes provide 100% capital safety with a assured return of 12.7%, and the potential for a return of as much as 30% below sure circumstances by combining credit score and choices methods.
Stablecoins’ credit score returns kind the bottom return, whereas a part of the returns are used to purchase out-of-the-money (OTM) name choices on crypto belongings – the ‘bull’ part, which drives the excessive bonus payouts as costs rise.
The lending counterparties on this case will not be sensible contracts, however giant crypto market makers, so this entails some credit score threat. Cega facilitates these loans, however is just not a custodian, and manages the chance via strict authorized agreements and ongoing credit score monitoring by Credora.
Learn extra: Bitcoin lenders have a brand new regulatory-friendly possibility for returns
Primarily based in Singapore, Cega emphasizes compliance with international laws. In the present day, that requires geofencing from US-based prospects.
Decentralization plans
The corporate has raised a complete of $9.3 million from notable traders, together with Dragonfly and Pantera, and doesn’t but have a token.
Zhang stated his workforce has intentionally averted taking part within the factors incentive recreation that has been in style over the previous yr, preferring to deal with producing actual sustainable returns.
“We’re really very happy with that,” stated Zhang.
Even with out incentives, the platform presently has about $16.6 million in TVL and about $404 million in cumulative buying and selling quantity.
Wanting forward, Cega plans to launch a token whereas sustaining its core values of accountability and prudence, Zhang stated.
“There are far too many protocols in crypto and in DeFi which are simply not constructed on actual foundations,” he stated, citing the venture’s revealed values.
“There are simply far too many examples within the ecosystem of carelessness and lack of accountability, and that is not us.”