iGain Interest Rate Synth by Hakka

Published on: 16.01.2022

Hakka Finance introduced iGain, an option-like trading platform in which the price settlement approach will depend on the DeFi investment target.

It is based on a dual-token system, where users can buy Long and Short tokens, as “calls” and “puts” on future changes of those investment targets.

In this iGain ecosystem, they can create a variety of financial derivatives by merely changing price settlement mechanisms based on the investment target.

iGain- Interest Rate Synth (IRS) represents the second product in the iGain ecosystem. It is an interest rate derivative providing lenders and borrowers a platform to hedge against the risk of future changing interest rates. It empowers investors to lock future interest rates, by purchasing Long and Short tokens.

For example: Ben, as a lender, can secure future interests by purchasing Short tokens, while Wego, a borrower, can cap borrowing costs by buying Long tokens.

The entire system design does not involve a deposit of the principal into the smart contract. The capital efficiency can then be maximized, since the capital and liquidity available are all gathered into the trading market of the interest rate derivative.

Why iGain IRS?

Fixed interest rate protocols, as the foundation of asset management, are springing up as the infrastructure of the decentralized financial services is reaching maturity. Each protocol has different mechanisms, but iGain IRS has at least 3 advantages compared to other competitors:

– Maximized capital efficiency

Existing fixed interest rate protocols require principals to get interest incomes, which dramatically reduces capital efficiency. In contrast, iGain greatly improves it by gathering all system capital and liquidity into a single interest derivative marketplace.

– Better equilibrium in one pool

iGain pool constitutes ERC-20-based Long and Short tokens, which can be transferred, used in 0x protocol, and traded in any AMM to satisfy investor needs. The dual-token design can serve both interest lenders and borrowers. Moreover, the competitive dynamics between both sides is supposed to reach equilibrium with the prediction of the future interest rate.

– Enabling short interest rate

Most of the fixed interest rate protocols can merely purchase yield tokens to “long” interest rate, and investors, therefore, fail to effectively “short” interest rate as the yield token is overpriced. As a consequence, the price becomes less sensitive to market change. In iGain, investors can directly buy Short token to “short” interest rate and gain profits as the interest rate drops.