Apollo’s Moonshots: Want to double your staking yield? Get skin in the game with bear-market builder dHEDGE
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David Angliss, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares the fund’s regular take on what’s happening in the fast-changing and volatile cryptocurrency space.
dHEDGE, a decentralised investment fund co-founded by Apollo Capital chief investment officer Henrik Andersson, isn’t taking this bear market lying down. In fact, it’s been busier than ever.
Having shipped several new products and protocols in Q2 it’s currently in the process of integrating and implementing further significant upgrades and developments, including decentralised options trading, tokenised derivatives strategies and new staking capabilities.
Whenever it is that market conditions do turn a more sustained shade of green, dHEDGE is making sure it’ll be as ready as it can be to capture a new wave of DeFi participants.
Late last week, Apollo’s David Angliss introduced Stockhead to dHEDGE head of growth and marketing, Jake Richards, and we sat down with both to discuss three new reasons for the protocol’s bullish case…
A quick reminder first… what is dHEDGE?
dHEDGE has been around for about two years and is a decentralised asset-management protocol connecting investment managers with regular investors on the blockchain. It’s based on Ethereum, although also has operations on the layer 2 networks Polygon and Optimism.
As Richards explains, investors essentially buy a pool token in which to put their asset or assets, then in a non-custodial, trustless way, asset managers deploy those assets into various strategies, various coins, to try to earn a return. They’re then paid a performance fee.
“So what you see when you first load up the dApp (decentralised application) is a whole bunch of pools that have been created by different fund managers,” says Richards. They could be VCs, they could be professional fund managers, they could be guys in the basement, managing just $500.
“It’s permissionless, so we don’t have any control over who does or who doesn’t set up a fund. There’s no KYC. It’s all on-chain and software that’s out there to be used.”
Simply put, you can think of dHEDGE as a way of democratising access to hedge funds.
Here’s what’s been happening under the hood with the Aussie-founded DeFi protocol since we last spoke about it with Apollo…
A new, improved version of staking the DHT token to earn rewards is coming. And, as Richards explains, it’s significant for two chief reasons.
For one, it will likely create more demand for the DHT governance token. But, more importantly, it should also create sustainability for it and dHEDGE ecosystem, boosting specific pool performance returns as well as simplifying how governance power is accrued.
How will it do this? DHT staking differs from the set-and-forget approach many other protocols employ. This type of staking requires a fair amount of active involvement in order maximise your returns.
The chief difference now, is the requirement that staked DHT is now required to be paired with a portion of staked dHEDGE pool tokens (DHPT), creating a “staked position”.
The aim is to align protocol revenue (generated from fees associated with manager performance) with protocol emissions.
Per a blog on the upgrade Richards and Angliss shared with Stockhead:
“There are a few mechanisms that influence this, being:
The above three variables are fully optimised when:
Richards admits that it’s not the simplest method on the market for earning staking yield, but get it right, and the benefit is clear – the staker stands to earn 100% of their intially staked DHT as reward.
“We want to give users more skin in the game to get rewards that are more funded by protocol revenue rather than just unfunded emissions.“
Doubling up for a little more engagement and effort? Sounds like a win.
You can read more about it here…
The next bull-case development is dHEDGE’s protocol integration with Lyra, happening some time around September 12, says Richards.
Lyra is a decentralised options exchange on the Optimism layer 2 rollup network.
This one’s big, because, for the first time, it will allow dHEDGE managers the ability to trade options contracts within their managed pool.
Lyra can run both call and put options for ETH and BTC on the Optimism network at biweekly rolling expiries – out to 12 weeks.
And the protocol uses the Synthetix sUSD stablecoin as seed liquidity for options markets, in addition to multiple other protocol functions… which leads us to…
As well as providing an additional asset class for dHEDGE managers, says Richards, the Lyra integration will enable Toros Finance, a dHEDGE-built automated strategies protocol, to offer new strategies incorporating options.
What’s more, at the launch of the Lyra integration, Toros will run a “Long Volatility” strategy, which involves automated periodic buying and liquidating of options contracts and profits when volatility rises.
It’s a strategy that complements the existing Toros offering of dSNX Debt Hedging Index, Stablecoin Yield, Market Neutral Yield and a range of leveraged token services.
— ermin (@_ermin) August 24, 2022
Toros is a dHEDGE incubated protocol deployed on Polygon and Optimism, integrated with leading DeFi protocols such as Aave, 1inch and now Lyra. Its chief aim is to simplify access to complex derivative strategies, safely, via tokenised automations.
“It’s becoming extremely flexible and powerful in the range of strategies that we can build and operate in an automated fashion,” says Richards. “And so that’s how we’re trying to demonstrate these suites.”
“The Toros long volatility strategy simply buys calls and puts at specific intervals and delta ratios.
“But soon, we’ll be able to run other strategies that are really using a complex traditional finance, derivatives service, all decentralised on one blockchain. And non-custodial, so that you’re always in control of your assets.
“And through all this, there’s this sort of impulse that’s growing. It’s attracting a lot of interesting use cases to Toros and dHEDGE.
“We’re now becoming integrated with a broad range of DeFi tools, and we’re making funds way more capital efficient. I think that’s the key point here.”
At the time of writing, the author of this piece holds several cryptocurrencies, including Bitcoin and Ethereum. None of the views expressed in this article should be taken as financial advice.