Y2K offers a suite of on-chain structured products designed to allow users to hedge, leverage, and speculate on the risk that a particular pegged asset deviates from its fair market value.
Y2K is a depeg insurance platform with several products. Earthquake is the flagship product that enables 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 like stablecoins, liquid wrappers and other derivative assets. Users hedge against depeg risk by depositing ETH as collateral into the Hedge vault and receiving y2kTokens in return. Currently, users can hedge against FRAX, USDC, USDT, MIM and DAI on a weekly and monthly basis. On the other side, risk takers can sell insurance by depositing ETH in the Risk vault and receiving y2kTokens in return. Each pair of vaults has the following properties: asset, epoch, and strike price. The strike price is how far from the peg the specific asset needs to deviate before a liquidation event is triggered and thus a payout to the Hedge vault depositors. Users can deposit at any time before the epoch starts, after which the funds are locked for the duration of the epoch. Y2K users Chainlink oracles to monitor the prices of the pegged assets. In the event a depeg hits the strike price, the funds in the Risk vault are liquidated and awarded proportionally to the depositors in the Hedge vault. Wildfire is the secondary market built on top of Earthquake. Since user collateral is locked during an epoch cycle, Wildfire enables users to exit their positions in real-time via its order book system. These positions are redeemable for a fraction of the collateral in case of a depeg event, which allows traders to speculate on depeg sentiment in a secondary market without needing to lock their positions.
Y2K charges a 5% fee on all Hedge vault deposits. There is also a 5% fee collected on Risk vault deposits upon a depeg event. If there is no depeg, then no fee is charged.
You can deposit ETH into the Hedge vault to hedge against depeg risk. Alternatively, if you believe a depeg is unlikely, then you can deposit ETH into the Risk vault to earn insurance premiums. Risk vault depositors receive premiums regardless of whether a liquidation event occurred.