Use Cases of Powers
Now let’s explain the Deri Powers with some specific examples of mBTC^2.
Assume BTCUSD =40000, and mBTC^2 is traded at a price of 1631284.
Case 1: Long powers to boost the up-side profit with protected downside
Alice believes BTC will rise significantly and would like to make profits from such a judgment. She longs 1 mBTC² to get more leverage with limited losses.
If the price of BTC went up to $50000, the market price of mBTC² went up to $2548882 (a trading result of the market) and Alice would have an unrealized PnL of 2548882–1631384=917598, 56.25% PnL for the long positions she holds.
If the price of BTC went down to 30000, mBTC² went down to 917598(a trading result of the market), then Alice would only have a loss of 917598–1631284=-713686, down by 43.75%.
Case 2: Short Powers to collect the funding fee
Assume BTCUSD =40000, and mBTC² is traded at a price of 1631284 (i.e. Mark=1631284).
Bob predicts that BTC price will fluctuate around 40000 and would like to make profits from his judgment.
Bob shorts 1 mBTC² received from those holding a long position of 1 mBTC², the following amount for every week:
That is, a long contract pays a short contract 31284 USD per week. However, please note that the funding fee is accrued on a second basis (and settled whenever there is a trading action), so every second a long contract will accrue a funding fee of 31285/(7*24*3600)=0.0517 USD to be paid, while every second a short contract will accrue 0.0517USD to be received. Please note that, even with a milli unit, 1 unit of mBTC² is still a very large contract, with mark price over 1 million USD.
Case 3: Hedge Impermanent Loss with Power Perpetuals
Check the detailed explanation of how to hedge impermanent loss with Deri Powers here: https://deri-protocol.medium.com/hedging-impermanent-loss-with-power-perpetuals-2d54c16d6a23
About Deri Protocol
Deri, your option, your future!
Deri is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on chain. With Deri Protocol, trades are executed under AMM paradigm and positions are tokenized as NFTs, highly composable with other DeFi projects. Having provided an on-chain mechanism to exchange risk exposures precisely and capital-efficiently, Deri Protocol has minted one of the most important blocks of the DeFi infrastructure.