Y2K Blog

Y2K Finance

15 Aug, 2022


3 min read

Proposed Y2K Usecase for DAO’s and Protocols w/ Actively Managed Treasuries

“Put your money where your mouth is.”

The allusion here is quite simple. We believe that an organization should be willing to contribute cold, hard cash to support the views they are stating.

In crypto, where there is an abundance of money, it’s a funny to see how much ‘mouth’ backs some bold claims.

Exhibit A: “These 3 simple words backed 11 figures in AUM”

Exhibit B: “Mega bid from every billionaire in the world”

So, what am I getting at here…?

The impetus of the light roasting above is that we see a unique opportunity for protocols developing pegged assets to ‘put their money where their mouth is’ in a way that benefits themselves, their users and Y2KFinance.

As the market heats up, we expect to see protocols with untested mechanism designs revolving around the use of stables, algostables and other pegged assets to come back. The problem with this is that the market is very wary of these types of assets in the wake of recent events.

Further compounding the problem, there is no reliable way for people to hedge their exposures to these up and coming protocols. Protocols may try to put up unsustainable yields to boost the risk:reward ratio to a level where participants overcome their fear, but unsustainable is the operative word here.

This is where we believe Y2K can come into play. With our structure products, we can work with protocols and DAO’s to set up fully customizable vaults where they can sell insurance on the stability of their asset to their users. In fact, we hope this becomes somewhat of the norm, as realistically should you use a protocol that doesn’t believe in their product enough to allocate a small portion of their treasury to sell insurance?

Theoretically, it would look something like this:

1- Protocol X works with us to design a vault for their pegged asset.
2- They pick the duration/epoch length they’d like to sell insurance for. By default this is 1 month, but can be customizable depending on the durations they are comfortable with, as well as the durations their users want to have.
3- They select their strike price range. By default this is .99, .97 and .95, but again this is customizable.
4- They allocate their desired amounts of collateral to each strike, and whether they would like to be the only sellers of the insurance or would let some predetermined amount of capital join them in the risk vault.
5- Users of their protocol would then be able to hedge their Protocol X exposures on Y2k, being sure that their payouts would be honored on-chain while also being able to take advantage of the vertical and horizontal scaling that comes with the Tsunami and Wildfire products.

A framework like this accomplishes several things:

1- Builds user trust in the protocol, as the protocol themselves is putting up money to show the confidence in the stability of their product.
2- Provides ample liquidity for users to hedge their exposures in case of depeg.
3- Creates a steady monthly revenue stream for the protocol in the event of no insurance payout.
4- Expands the Y2K ecosystem/depth of liquidity.\

To further sweeten the pot, to Protocols and DAO’s that partner with us, we would be offering boosted yields and the lion’s share of mint and claim fees.

With that being said, if you are a protocol who has launches or is planning to launch any sort of pegged asset, and would be interested in discussing a potential partnership, please reach out to us on Twitter @y2kfinance .

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