Elk Finance announced this Thursday, January 27, through its Twitter account, its new partnership with Hedgey Finance.
“Elk Finance is a peer-to-peer network for cross-chain value transfers. ElkNet, its cutting-edge multi-chain protocol, makes it easy for anyone to move value and trade cryptocurrencies across blockchains quickly and securely at a low cost. Hedgey is a marketplace protocol for buying and selling custom DeFi offerings in any token. Token and DAO teams use Hedgey to generate stable returns on their treasury while creating structured tranches in which tokens can enter the market. Buyers and the community use Hedgey to gain unique exposure to a token outside of traditional markets with unique advantages”, he said in an article published on the Medium platform.
What are treasury funds?
The company explained that treasury funds are a tool for treasury diversification that gives token project teams a way to generate a stable return of coins using their treasury without selling tokens on the market. Treasury pools are created by locking tokens in the Hedgey protocol to generate the equivalent of a large supply of calls covered in the token. Buyers can purchase chunks of these Treasury funds to claim rights to the tokens at a fixed price.
Why are they powerful?
• Allow token teams to generate returns without selling tokens on the market.
• They create minimum price ranges at which the tokens can enter the market.
• They give buyers a one-time exposure to the tokens for a set period.
According to the firm, if award contracts act as a time barrier for tokens entering markets, treasury pools act as a minimum price barrier for tokens entering markets.
Who buys from the Treasure Pools and why?
The company indicated that the treasury funds offer buyers a unique way to interact with project tokens. When you buy a share of a treasury fund, you are buying the right to claim a fixed number of tokens, at a fixed price, until your contract expires.
“This is powerful for buyers who think the price of a token is going to go up beyond the price they claim. When this happens, buyers can redeem their Treasury Fund shards and access those tokens at the price that was valid for their contract”, he added.
How to read a cash pool contract
• Valid until: If you buy a “chunk” of the treasury fund, you are buying a contract. “Valid Until” is the term of your contract.
• Contract Size – In the example above, this is the amount of HNY$ your contract gives you exposure to. In the first example below, paying $30xDAI gives you exposure to $1HNY.
• Top Profit – This is the HNY$ price at which your contract becomes profitable. It is based on the amount you pay for the contract + the “exercise price”
• Profit Chart – This chart gives you an approximate profit calculation based on your contract size and possible movements in the price of $HNY
The company indicated that each Pool is made up of different combinations of these variables. The cost of a contract is influenced by each variable. For example, contracts expiring in March would theoretically cost more than those expiring in February. Contracts that are profitable at a lower HNY$ price would theoretically cost more than those that are profitable at a higher HNY$ price.
What will the ELK pool look like?
Similarly, he highlighted that the $ELK Treasury Fund will be a small pilot fund to judge the effectiveness and community response of the use of Treasury Funds in the future. Details will be determined closer to launch.