Abstract

The DeFi market is expanding with a lot of yield opportunities through various mechanisms and tokenization has made it very easy to simplify the UX of participating in these strategies.

Each of these strategies have their own level of decentralization, permissionlessness and risk. Although participation has become easy but navigating these strategies mechanisms has become very difficult even for advanced users.

As users not always know what is happening underneath the strategy especially if a lot of components involve off-chain activities or unpredicatable behaviour like in under-collaterlized loans, so they need a way to hedge for these risks.

There is currently no infrastructure where users can hedge for these risks as these are idiosyncratic in nature and specific to a particular strategy and asset type.

Autonomint response is our dCDS risk primitive that creates an infrastructure for premiums to be passed on to willing risk underwriters and allotment of risk across every user participating in the dCDS.

dCDS Architecture

Autonomint has built on-chain hedge markets. It’s a PvP platform where two sides interact:

• Hedgers: These are users who want to hedge their tokens prices and mint a stablecoin.
• Earners: These are users who want to earn high hedging premium yields on their stablecoins or crypto assets like ETH, LRTs, OP, AERO, etc.

This is powered by a new financial primitive called dCDS.

The dCDS stands for decentralised credit default swaps. It is a shared risk primitive that allows users to pool in capital to underwrite for various risks and get continuous premiums in a fully automated and on-chain immutable way.

It works by proportionally assigning risk units to dCDS users for every $1 worth of risk being hedged by their deposited token amount.

Case Study

Initial Action:

A ETH Holder deposits $100k worth ETH into the platform for hedging

Process Flow:

1. The deposit is processed and moved into the ETH vault.
2. The ETH price at the time of deposit is recorded, and the hedging premium is calculated.
3. The user receives USDA+ stablecoin, minted at 80% LTV against their $100k ETH.
4. The platform calculates the hedge premium using our option-pricing risk engine, then automatically deducts roughly 3–4% of the LTV amount to pay for this premium.
5. This premium allows the user to hedge their $100k ETH against any downside price fall of upto 20%. The hedge is valid for 1 month at a time.
6. After the premium is deducted, user is left with ~76% worth of USDA+ that can be deployed in dCDS to earn yield or added to the USDA+/USDC Curve pool, which is currently incentivized with USDC.