Introducing Hegic Long-Term Pools

Published on: 13.08.2021

Hegic introduced Hegic long-term pools (HLTPs) that is a new incentivization primitive used for rewarding the liquidity providers long-term participation in the protocol which is based solely on the cash flows generated by the protocol.

The HLTPs model is not a native asset-based incentivization mechanism. It doesn’t depend on the protocol’s ability for a continuous distribution of the rewards denominated in the protocol’s asset. This is not a new $HEGIC liquidity mining program but a brand new incentivization primitive per se.

The Hegic long-term pools (HLTPs) are expected to work in such a way:

🔸I. After a fixed period of time (e.g. every 1st day of the month), the total premium rate (the amount paid to the liquidity providers by the options buyers) decreases for a fixed value (e.g. from 100% to 95% in the 1st month).

🔸II. This share (5%) of the total premium — the difference between the previous one and the new premium rate — is then redirected to the Hegic long-term pools (HLTPs) contracts that are holding these funds (the future rewards).

In the example above, 5% of the premium will start to be redirected to the Hegic long-term pools starting the 1st day of the month (e.g. September, 1).

If the total gross premiums generated by the protocol during this month will be $10M, then $500K (5%) will be distributed to the Hegic long-term pools.

🔸III. The period for the ongoing HLTPs should be fixed (e.g. 12 months). After this period is finished, 100% of the rewards accumulated in the Hegic long-term pools will be distributed among the liquidity providers who have deposited liquidity and haven’t made any withdrawals during the whole period.