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Mechanics
Positions in Earthquake are defined as an ETH deposit in one of two types of vaults:
- Premium vaults
- Collateral vaults
A user can ‘purchase’ insurance on a de-peg event on any of our supported assets by depositing ETH to the corresponding Premium vault. The deposit would mint an ERC-1155 Y2K token representing their position in the vault.
Conversely, users can sell insurance by depositing ETH in the Collateral vault. These Users also mint an ERC-1155 Y2K token representing their position in the vault.
Users can deposit into Y2K vaults during the deposit period of the epoch. After the deposit, funds are locked for the duration of the epoch. The deposit period spans over the first 2 days of both the Weekly and Monthly epochs. Note that depeg protection is only initiated after the deposit period ends. If a depeg event happens during the deposit period the vault will not strike.
Note that for the first epoch of the IFO the deposit period will be 7 days, starting on October 31 and ending on November 7th. All epochs thereafter will follow the deposit schedule outlined above
Users who are seeking to get exposure to the depeg risk market, would deposit in the Collateral vaults, acting as an underwriter of depeg insurance. Depositors collect a pro-rata share of the premiums from the Premium vault deposits, while creating a market for depeg protection for the Premium vault.
Upon depositing into the Collateral vault an ERC-1155 token will be issued as a semi-fungible receipt of the deposit. The vault token will be tradable upon Wildfire launch.
The ERC-1155 will be presented in the following format: y2k_token_premium/collateral_strike_epoch
The token needs to be staked to be eligible for the IFO rewards, un-staked tokens will not be accumulating rewards.
Scenarios:
- Vault does not depeg
- Collateral vault depositors receive a pro-rata share of Premium vault deposits (premiums)
- Vault depegs
- Collateral vault depositors receive a pro-rata share of Premium vault deposits (premiums)
- Collateral vault depositors transfer their principal to Premium vault depositors
Users who are seeking to Hedge against volatility in pegged assets would deposit in the Premium vaults. Their deposit acts as an insurance premium that entitles them to a pro-rata share of the Collateral vault deposits upon a depeg event.
Upon depositing into the Premium vault an ERC-1155 token will be issued as a semi-fungible receipt of the deposit. The vault token will be tradable upon Wildfire launch.
The ERC-1155 will be presented in the following format: y2k_token_premium/collateral_strike_epoch
The token needs to be staked to be eligible for the IFO rewards, un-staked tokens will not be accumulating rewards.
Scenarios:
- Vault does not depeg
- Premium vault depositors transfer their paid up premiums to the Collateral vault depositors
- Vault does depeg
- Premium vault depositors transfer their paid up premiums to the Collateral vault depositors
- Premium vault depositors receive a pro-rata share of Collateral vault deposits
Users now have the freedom to opt-in any part of their deposit to roll into the next epoch and can adjust their rollover amount or opt-out before the previous epoch ends.
Note that rollovers happen at the first block of the new deposit period ensuring the lowest information tax on the deposit.
Users are able to deposit into a queue anytime without waiting for deposit windows. Keepers empty this queue each time a new epoch's deposit window opens, securing the position of queue depositors.
Note that once a position enters a queue it cannot be withdrawn until the next epoch is resolved.
Chainlink, Dia and Red Stone oracles are used to monitor pegged assets price of the Earthquake vaults. The following are the feeds that are used:
When the oracles indicates that the strike price for a given vault has been hit, the epoch will end and vault will be closed. This will initiate a transfer of Collateral vault deposits to the Premium vault.
The protocol collects a 5% fee in the following scenarios:
- 5% of Premium Vault deposits
- 50% allocated to vlY2K
- 50% allocated to Y2K Treasury
- 5% of Collateral Vault deposits upon a depeg event
- 50% allocated to vlY2K
- 50% allocated to Y2K Treasury
- 50% allocated to vlY2K
- 50% allocated to Y2K Treasury
Consider the following example using $MIM:
A user or DAO who holds the majority of their risk-off portfolio in MIM can set aside some ETH to purchase a hedge against their MIM exposure. Users pay a monthly or weekly premium to maintain the hedge.
Scenario where the strike price is not reached (no depeg)
Scenario when the strike price is reached (depeg)
Last modified 1mo ago