Y2K Finance is a suite of structured products designed for exotic peg derivatives, that will allow market participants the ability to robustly hedge or speculate on the risk of a particular pegged asset (or basket of pegged assets), deviating from their ‘fair implied market value’.
The protocol brings three main products to the table:
- Earthquake: This flagship Y2K structured product leverages a variant of the ERC-4626 standard for the creation of fully-collateralized insurance vaults. Users can use these vaults to hedge, speculate and underwrite the volatility risk associated with various pegged assets. Token holders are rewarded from trading fees derived from this marketplace.
- Tsunami: Pushing on-chain derivatives to the bleeding edge, Tsunami is a Collateralized Debt Obligation (CDO) powered lending market for pegged assets with MEV-proof liquidations.
- Wildfire: Providing a secondary market for the trading of tokenized risk, Wildfire is an on-chain RFQ orderbook where users can trade Y2K risk tokens amongst themselves, both unlocking ample liquidity and allowing for rapid repricing of semi-fungible tokens in a fickle market.
Participants can deposit into Y2K vaults at any time before the epoch start date, after which funds are locked for the duration of the epoch. Chainlink oracles are used to monitor pegged asset prices, and in the scenario where an asset de-pegs to a degree larger than the strike of a vault pair, the contents of the collateral vault are liquidated and awarded to the premia vault depositors.
In the event of no de-pegging over the course of an asset’s insurance epoch, both premia and collateral payments are delivered to the insurance sellers. It’s important to note that insurance sellers receive premiums regardless of whether there was a liquidation event, and all cash-flows occur at the end of the epoch.
