Visiting harecrypta — Adam, business developer, presents the project Cega Finance.
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I got into crypto in 2017. Together with my friends, I discovered Chainlink and invested in it at an early stage, and also launched a node, which brought in my first capital. This allowed me to launch my own project https://twitter.com/mycelium_xyz,derivative protocol. For several years I was one of the core members of the team. We provided perpetual swaps and were a fairly niche project at the time of our founding in 2021. I dealt with business development and operations issues. Last year he left the project, and in October of the same year he joined the Cega project.
Cega is a structured investment products protocol that offers a variety of structured investment vehicles that enable safer, more efficient and consistent returns in all market conditions through exotic options.
Note: exotic options are a special type of financial options that differ from standard ones in more complex combinations, non-standard conditions, and non-standard exercise dates. Due to a variety of factors, such options offer higher potential returns and risks and require the investor to have greater market understanding and experience.
What I like most about Cega is that they have implemented an exotic options structure. This allows users to adjust risk/reward ratios across different market conditions, be it the FTX crash or the LUNA crash, and effectively customize option payouts, delivering higher, longer-term returns.
If you have USDC or ETH in your portfolio, with us you can receive returns from 12 to 60% per year. We launched on Solana last June and attracted attention with our exotic options. In three months, we pumped TVL to 45 million at its peak, just before the FTX collapse. After the crash, the entire market, and DeFI in particular, suffered in terms of liquidity outflow.
This year we are expanding, introducing new tools and launching products on the Ethereum and Arbitrum networks. Since the black swan moment and over the next year, we have shown stable growth.
How the project attracts liquidity
Attracting TVL is a mixture of business development and marketing: campaigns in Galxe, tweets, partnerships with colleagues, presence at conferences, establishing friendly contacts, network effect, contact with the target audience through LinkedIn, Twitter. We have many strategies in these areas. After the FTX crash our TVL dropped from 45 million to 7 million, however since the beginning of the year we have doubled to 15 million. We also reached a trading volume of 300 million. This is a great achievement.
Privileges for OG and Supersonic NFT holders
Previously, we provided NFT holders with exclusive access to certain products. We are looking for new ideas for using NFTs. Perhaps more exclusive access to high-margin products is on the way. Lately we have been focused on the launch of V2, which recently took place. There will probably be some kind of privileges for OG - this is a great idea to implement in the future.
We spent all our time launching V2, but poker/movie nights will return, maybe not just poker, offer options.
We select networks that have the greatest potential to attract TVL. There is no specific roadmap. In the first quarter of 2024, we will determine the strategy - expansion to new networks or focus on current products. Our presence in Ethereum and Solana gives us good growth opportunities. Ethereum - large funds, large players who boost TVL. Solana - popularity due to market growth.
Opportunities are more important than technology. We are looking at the possibilities. Technology is also important, but what’s the point if TVL is zero and no one uses blockchain. We are happy with the security of Ethereum and Solana, but the most important factor is TVL and attracting volumes.
It is important for us to determine where the users are, whether they are options traders or web3 treasuries. Many of our products are suitable for both retail and whales or funds, and we are looking for the largest concentration of these types of users - this is the network we will move into in the future.
In general, this does not entirely apply to our product. Our product is not the same as a liquidity pool. If you have, say, an ETH/USDC position on Uniswap, you run the risk of suffering from permanent losses. If you deposit USDC or ETH on Cega, these assets are used only in options and, unlike Uniswap or other liquidity pools, are not subject to permanent losses.
I didn’t delve deeply, because... I do not directly touch the products. As already mentioned, we offer products with an exotic options structure. Our first flagship product, which we launched last June, is a fixed coupon note. It is tied to one of the exotic options, which is called a barrier option.
The user deposits USDC and bets that the price of a basket of assets, including the least successful asset in the basket (such as Bitcoin or Ethereum), will not decrease by 30% within a month. If this happens, and the price of Bitcoin or Ethereum does not decrease by 30% within a month, you will receive a return of 15%, which is reinvested monthly if the conditions are met. The mechanism is executed by a smart contract, the price is adjusted by the oracle, and funds can be withdrawn at any time.
Our new product is dual currency vaults. While in previous products we only accepted deposits in USDC, we have now decided to take advantage of the increased interest in LST (liquid staking tokens) and allow deposits in ETH or LST while maintaining exposure to the ETH price, maintaining exposure to staking rewards and at the same time earning income from Cega structured products. This product gives returns from 20% to 50%. After its launch, we saw a huge increase in TVL - from 9 to 15 million in a week.
Essentially, this strategy works on the “buy low” principle. You sell a put or call option and, when a certain price is reached, the order is executed. For example, if you make a deposit in USDC, a position in ETH is gained and vice versa - when you deposit USDC, a position in LST is gained. The strategy allows you to sell options to buy ETH if the price drops in a month, say, by 5%. Or vice versa. Thus, we can make a profit of 5-10% from the initial price of the asset, while you receive an income of 20-50%.
Note: it is difficult to grasp the nuances in theory, especially without preparation. In general, this is some kind of fierce mix of options, liquid staking and who knows what else. To understand it, it’s better to use the protocol yourself.
Bonds and futures options based on fixed coupon note + new product dual currency vaults are three of our products that we are really proud of and look forward to launching new types of collateral. These may be other LSTs or Solana - depending on demand.
Management fee 2% + 15% from the profit received from our strategies. We recently removed commissions from our bond plus option products. These products are the most conservative and yield around 12%. We plan to raise yields before reintroducing fees in these products. The 2% + 15% scheme is less than that of hedge funds.
On some exotic options products, the API/APR ranges between 20% and 135%. Where does such a large spread come from and how does the project ensure stability of interest rates?
The fixed coupon note product has a leverage option vault.
Next, Adam explains at length the mechanics of this option. In short - shoulders.
Security issue, multisig, encryption
Our protocol supports a large number of web3 wallets. Perhaps some wallets support 2FA. We don't control this, it all depends on the user. We adhere to the spirit of DeFI.
We are considering issuing a token, but nothing has been confirmed. This could give a good boost to the hype around Cega. There will be more information in the first quarter of 2024.
We don't want to at the moment. We are afraid of dealing with regulators and do not approve of KYC. Now the main thing is to pump up TVL as much as possible. Focus on attracting the existing market. Perhaps in the future the focus will shift to expansion - through partnerships with CEX, or others, for example with JP Morgan, which could acquire some of our products. But before moving to the next level, you need to conquer the current market.
However, this implies a lot of associated costs, for lawyers, KYC/AML partners, etc. In addition, DeFi maximalists do not share such moves. I've been in DeFi since 2017 and have been a DeFi maximalist for a long time. But the path to centralization/regulators may be the only path to successful business development for many DeFi projects. The question that everyone should ask themselves is whether to follow this path, or choose the decentralized degen path, missing out on potential opportunities to attract additional volumes.
It depends on the company, on the projects, on the type of product being launched. For example, products like Cega in traditional finance are traded for millions and millions of dollars by government agencies, fund managers, etc. Therefore, our product can go this route. The question is when to do it and whether it is worth it at the moment.
It's a funny story. Sega and Cega are read the same. Sega with the letter S is associated with the gaming company famous for the Sonic the Hedgehog character. And Cega with a C is an acronym used in options trading for effective risk management (Options Greeks). This is where the name of the project came from. When it came time to come up with a marketing strategy and brand, the project decided to use wordplay and association with the game Sonic. At conferences, when I present a project, I often add the clarification that it is Cega with a C and is not affiliated with the gaming company. This became part of the brand, giving the project a decentralized character and a bit of humor.
Exploits are a huge problem in the DeFi space. My advice for all projects is to always undergo audits, and not just by one auditor. It is important to get an assessment from firms with diverse experience, because... different auditors may find different vulnerabilities.
As for Cega, the project has successfully passed a double audit from OtterSec and Zellic + an additional audit for our new product dual currency vaults. Also during the development process, we received security advice from the lead auditor Code4rena. In total, our infrastructure and products have been audited 6 times, and we will continue this practice as we launch new products.
Author Krokocoin, editing @evaneskate
