All About Naughty Price Protection

Naughty Price Protection is the next-generation token price protection designed by Degis in this rapidly changing crypto world. We use a token model in Naughty Price Protection, each token represents a protection and can be freely traded in the market. If the insured token price falls below the trigger price when the pool expires, the protection token owner will be compensated. Degis adopted the Initial Matching mechanism to set the initial protection token price fairly, and Protect to Earn mechanism is applied to allow users to earn during the protection process. As risks can’t be eliminated in this volatile market, let Naughty Price minimize the loss and protect your assets!

The Market Needs Naughty Price Protection

Recently, under the influence of the external economic environment and the frequent occurrence of black swan events, the crypto market has fallen sharply, the market value of crypto has declined for nearly two months. At the same time, the mainstream tokens in the market have also created new lows in more than a year.

During this period, if crypto users did not purchase protection or hedge their assets in other ways, their crypto assets may have experienced a horrible loss of more than 50%.

That’s why the market needs naughty price protection. As the next generation token price protection, Naughty Price can protect users from the risks caused by the market’s high volatility and help them survive in the bear market.

What is Naughty Price Protection?

As the next generation token price protection, Degis Naughty Price Protection is the first project in the protection market to adopt the AMM model to trade in order to meet the needs of users and provide them with the best price. At the same time, the Naughty Price also features the Initial Matching mechanism to find the initial protection price according to the current market situation. More importantly, Degis Naughty Price Protection has the unique Protect to Earn Mechanism that enables protection buyers to get extra rewards while protecting their crypto assets from all kinds of risks. These aspects will be covered in the following paragraphs.

Working Mechanism

In Naughty Price Protection, users can choose to become creator, buyer&seller or provider. Now, let’s walk through the roles one by one.

Creator stakes USDC.e into the policy pool as collateral and mint protection tokens in a 1-to-1 proportion. After creating protection, the creator can sell protection tokens to the swap pool before the expiration date. The swap pool is an AMM-based capital aggregation pool where trades between buyers and sellers (protection tokens and USDC.e) are constantly happening. When a protection hits its expiry date, the payout is only determined by a certain event (for example, the price of AVAX is below $15). If the certain event occurs at the expiry date, the protection token holder receives all collateral. Otherwise, the creator will get the collateral back.

Buyer&seller are users who want to protect their assets from the highly fluctuated market. Buyers can purchase protection tokens in the swap pool directly. While for sellers, if they create a protection token and then sell it into the swap pool, they can get a certain amount of USDC.e back. When the expiry date comes, if the event does not happen, the seller can redeem all the currently staked USDC.e; if the event happens, the protection token holder(buyer) can claim the compensation.

Here’s an example to elaborate on this process. You can use 1 USDC.e to create a protection token, which will be executed if the price of AVAX is lower than $90 at the expiry date, then you can sell it to the swap pool for 0.5 USDC.e. When the expiry date comes, if the price of AVAX is lower than $90, the person who bought your protection token with the price of 0.5 USDC.e will get 1 USDC.e payout. Else, you will get 1 USDC.e back.

Provider deposits USDC.e-Protection Token pairs in the swap pool to provide liquidity, getting LP tokens proportionally, which can be staked to farm $DEG tokens. 60% of the total transaction fee would be distributed to LP holders. Depending on the period of providing liquidity, liquidity providers are divided into initial liquidity providers and normal liquidity providers, initial liquidity providers will receive more generous rewards.

Time cycle

There are 3 periods in one phase of the Naughty Price Protection. The first day is the deposit period when protection tokens are minted by the deposition of stable coins and the initial price of the protection token is settled. Then during the trading period, there are 14 days for users to conduct a series of actions (like create/redeem protection tokens, buy/sell protection tokens in the swap pool, provide/withdraw liquidity, etc.). The last day before the expiry date is called the locking period, in which only liquidity providers can provide/withdraw their position in liquidity pools.

Initial Matching

In the traditional AMM pools, the initial price is usually hard to determine. On Degis, we solve this problem by introducing the Initial Matching mechanism. During the deposit period, liquidity providers can freely deposit or withdraw stable coins into the pool by setting the expected price for the protection token, which is called the initial matching. By adopting this mechanism, the initial price of the AMM trading pool is 100% determined by liquidity providers. The final ratio will be set according to the deposit proportion on both sides of the pool when the deposit period ends.

After the deposit period, the pool will be settled at the final price. Then, all the stable coins on the protection side will be used to create protection tokens, which will be used to initially set the AMM pool with the left stable coins.

The initial liquidity providers will receive initial LP tokens according to their deposit amount. These tokens can be used to mine in the initial LP mining pool for DEG, which will have a 1.2x higher mining rate than the normal mining pool.

Details of Initial Matching: https://youtu.be/PD94cIYLoZ0

Protect to Earn with Naughty Price

Degis is the first protection protocol that features Protect to Earn mechanism. Protect to Earn is one of the most important concepts of the platform that enables users to earn profits while protecting their digital assets. There are two functions under this mechanism, which are Buyer Incentives and Income Sharing:

Buyer Incentives is the function specially designed to protect buyers to get DEG rewards. Every time buyers purchase protection on Degis platform, a certain amount of purchasing credentials (Degis Buyer Token, also known as DBT, which is an ERC-20 token) will be automatically airdropped to the buyers’ wallet. These credentials will be able to stake into the buyer incentives function for DEG rewards.

After receiving the DEG reward, buyers can stake their DEG on Degis for veDEG, which is one of the most important tokens for Degis protocol. veDEG represents the voting power on Degis; veDEG holders can boost liquidity mining yield by holding veDEG. Meanwhile, veDEG can also be staked into the Income sharing function to share the platform income.

Details of DEG staking: https://youtu.be/UxPx6UrSJKg

Details of Buyer Incentives: https://youtu.be/sqflEyyMQLs

Income sharing enables Degis users to stake veDEG into the income sharing pool to share USDC.e income. The staked veDEG still has the same effect on boosting the DEG mining rate. The USDC.e reward in the income sharing pool comes from the platform operation income. Rewards will be distributed in proportion to the veDEG holder’s staking amount of the token.

Details of Income Sharing: https://youtu.be/EYF5n2rU4ts

Users’ crypto assets will be finely protected by the Naughty Price. At the same time, they will be able to earn rewards on Degis platform under the unique Protect to Earn mechanism!

What’s next for the Naughty Price Protection?

In the near future, we will provide naughty price protection for more Avalanche ecosystem tokens — XAVA, PTP, Qi are on the way! The Naughty Price Protection’s multi-token journey will start in late June, stay tuned to see which token will be the next to join the Naughty Price!