Pivot from covering sports bettering, to covering token volatility
Pharo’s Thorchain experiment went well, we asked when an event might happen next, and it seemed like a natural next step to apply this same approach to sports bettering. It turns out that the Chainlink sports bettering feeds don’t actually provide a boolean “the game has ended flag”, to trigger the event and pay everyone. It also became a challenge to ask a sports question that involved time; “What will the spread will be?” does not depend on time. “By when will each team score X/Y points?” Well that has two rates whose distributions will need to be compared … and this is getting away from the core purpose of using sports bettering to test Pharo 🙏
As important, we can’t throw the baby out with the bath water. We chose sports bettering for good reasons, including its wide appeal and standardized language, and those are still requirements for any Pharo market.
So we are pivoting to something that is more widely understood amongst the crypto community, and something that they, and likely you, need today. We will offer a market to cover volatility of popular tokens. Specifically downward volatility, and “popular” meaning meme tokens or tokens with a strong community; because either way, meme or community, there is a group of people with common knowledge about the asset… perhaps even wisdom 😊. We’re hypothesizing that these communities of people who believe so strongly in their coins, we’re hypothesizing that they are willing to provide liquidity for those that do not believe, knowing that:
1) They will likely not have to pay it out, and
2) They will reap the rewards of the non-believers looking for coverage.
Of course not everyone will feel this way, or have this fiscal position, so only the future will tell us what tranche of opinions is correct.
If we choose SHIB, a meme coin, we can ask a question that is likely on peoples’ minds:
“By when will SHIB drop 15% or more?”
Now I don’t follow SHIB myself, but from this graph I can imagine some people see SHIB trying to stabilize, or perhaps they believe SHIB is a store of value. Either way they’d want cover in case there’s a sudden sell-off, such as from a whale making a move or because negative memes take over the metaverse for a news cycle. In the future, as options are more widely available in DeFi, people may buy a call-option anticipating SHIB will increase in value, and hedge that position by buying another option with a higher strike price. One goal with this strategy is to reduce premiums so you have the funds to buy-to-close and open a new position, which can also be accomplished with Pharo with a premium up front that pays enough cover to cover the cost of moving into that new position.
If we choose LINK, which has a strong vibrant community, we can ask a similar question people may have:
“When will LINK have dropped 15% or more?”
I’m personally more familiar with the Chainlink community, and I can imagine recent drops haven’t been widely accepted as the norm and may even be a BTFD opportunity. The hodl community may want cover in case there’s new sell pressure, giving them the funds to BTFD or simply pay gas fees to change some related DeFi position. Again as options become more widely available, people may want to buy a put-contract and pay a premium up front that pays enough cover to cover the cost of … you get the idea 😉
There are other tokens with similar analyses, the real trick is recognizing assets that have a strong community, whether because of memes or building value, and ask a question a news cycle, a gossip cycle, might settle out by.
We’re looking forward to testing these ideas on kovan, handing out rewards, and to creating a little stability in a volatile world 🌎🌍🌏