Volatility Tokens
Moret has unique ERC20 volatility tokens. It's a well-known fact that volatility is relatively stable and provides key benefits to crypto players. The pricing stability of volatility makes it a quasi-stable coins as the annualised volatility levels bounce around 100% over the years.
While crypto prices are notoriously volatile, volatility itself is, to a large extend, range bound. This feature makes them suited as an alternative to stablecoins. In addition, volatility usually goes up when market crashes. Investing in volatility is a defensive hedge against market downturn.
Volatility tokens are ERC20 tokens linked to implied volatilities. They are specified by 1) the token whose price they track and 2) the time of observing the volatility. For example, ETH1 is the 1-day volatility token based on ETH price; and BTC30 is the 30-day volatility token based on BTC price.
Moret provides a platform where anyone can buy or sell volatility tokens that have values linked to the prevailing level of volatility. Moret provides two interfaces for volatility tokens: Issuance/Redemption and Option conversion.
Investors can buy volatility tokens from Moret in the same way as buying options. The quote of volatility tokens is the implied volatility based on the constant product market maker formula. The higher the capacity of the liquidity pool is, the lower volatility premium would be.
Similarly, investors can sell volatility tokens back to Moret, the quote will be also based on the capacity of the liquidity pool.
Each volatility token smart contract has its own treasury.
Holders of volatility tokens can convert volatility tokens to and from at-the-money call or put options with matching underlying token and expiry.
If volatility tokens are used to buy options, Moret will first burn the volatility tokens and transfer the corresponding amount of USDC, subject to a floor of average vol token price of the vol token treasury, from the volatility token smart contract.
If volatility tokens are paid out when traders sell options, Moret will mint new volatility tokens and take the corresponding amount of USDC from liquidity pool to the vol token treasury.
Last modified 5mo ago