$HEGIC
All about $Hegic role in the protocol and it's fair valuation
$HEGIC Fair Valuation
$Hegic is the core and blood of the Hegic ecosystem. Users can use $Hegic to participate in the Stake & Cover activities.
Tokenomics of $HEGIC are specific to the protocol, and provide real value to their owners. $HEGIC owners are option writers and they are collecting premiums and fees, fully participating in the protocols PnL, therefore are in complete financial ownership and responsibility of trading.
As profits are cash-settled (in USDC), investors can make a fair valuation of $HEGIC price, going from Epoch to Epoch.
Every Epoch results either in profit or in loss for $HEGIC stakers, based on the performance of traders. As more Epochs pass, we will have more precise APR for staking $HEGIC. Let's take a Epoch 2 as an example.
Epoch 2 PnL per Hegic was 0.000444$, which was 3.5% of the fixed Hegic Price for the start of the epoch (0.0124$)
That is annualised return of 42% on your investment, and the return is in cash (USDC)
Investing into $HEGIC carries a risk, so it can not be evaluated directly vs putting USDC in lending protocol like AAVE, but the rates can be compared
If AAVE is giving out 1.22% APY on lending your USDC we can take it as a Risk Free Rate (other than smart contract risk which is implied for every DeFi protocol), than it is fair to value $hegic in higher R/R ratio of desired annualised return (is it 10%, 20% or 30% it's up for every investor/free market to decide)
Based on our example numbers, $HEGIC price could be 0.03$ and return based on Epoch 2 would be 15% APR. With each Epoch passing, we will have more precise cumulative APR for last 6 months, 12 months etc.
Another argument is that if you hodl $HEGIC the return will be bigger than expected. It is fair to assume that the market price of $HEGIC will move according to what market feels is the desired R/R ratio. If Epochs predominantly end in profit, that would mean very high APR returns, which by rules of the free market will lead to higher $HEGIC price.
As everyone has a very subjective opinion in terms of how big of a reward should be for carrying the risk of possible loss in staking $HEGIC, the desired return range might be from 10%-30%, which will lead to $HEGIC fair evaluation. TradFi has been using Price/Earnings ratio for years to determine the fair price of a stock, and same can be applied here. As more and more Epochs pass, the market will price $HEGIC based on the P/E - will it be P/E ratio of 5, 10 or 20 it's up to be seen. Unlike a lot of DeFi protocols that proudly show their P/E ratios, but don't actually allow token owners to access those earnings in anyway (Lido, Uniswap being a perfect example), $HEGIC owners can claim protocol earnings in cash every month.
The goal behind implementing a new model that is focused on the fair valuation price of $HEGIC is to directly link the fundamental growth of the protocol to the token price. The growing volumes, raising popularity of options trading on Hegic, new products and strategies, thousands of new users, and tens of thousands of new options traded would be directly impacting the price of $HEGIC and the size of Stake & Cover Pool.
$HEGIC token addresses
0x431402e8b9dE9aa016C743880e04E517074D8cEC (Arbitrum)
0x584bc13c7d411c00c01a62e8019472de68768430 (Ethereum)
$HEGIC Token Supply
Initial distribution (circa Sept. 2020)
3,012,009,888 total initial token supply
Initial Bonding Curve Offering (IBCO) sold 90,360,300 token at $0.13 each
Hegic Development Fund (HDF) has not sold a single token
The February 2022 token burn reduced all but HDF's token holdings
$rHegic2 was used in one of the previous versions of the protocol as an incentive to LPs and options traders. Its only purpose is to be redeemed for $Hegic 1:1 at a later date.
Redemption of $rHegic2 is already running since ~ Jun 3 2022 (see announcement), and it ends March 3 2023
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