Top Things You Should Know About Hegic (HEGIC)

Hey guys, I’m back with another comprehensive Q&A piece, this time for the innovative on-chain options trading protocol on Ethereum – Hegic (HEGIC).
Hegic is an exciting new DeFi protocol that enables you to trade on-chain options for profits or to hedge your positions. It’s the first entirely on-chain, permissionless, and non-custodial options trading protocol.
Now, before we dive in, the following piece is similar to my latest articles on Ocean Protocol (OCEAN), Quantstamp (QSP), and Cream Finance (CREAM), so if you haven’t already seen those, be sure to check them out as well. 
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:

1. What is Hegic?
2. Who and When Created Hegic?
3. What is $HEGIC Token Used For?
4. What are the main products of Hegic?
5. Who can use Hegic Options?
6. Where to Buy Hegic Options?
7. Where to Store $HEGIC?
8. Where to Buy & Sell $HEGIC?

1. What is Hegic?

Hegic website homepage

Hegic is an on-chain options trading protocol that allows individuals (buyers) to buy ETH or WBTC call and put options and allows liquidity providers to sell ETH or WBTC call and put options.
The Hegic protocol is built on Ethereum and is powered by hedge contracts and liquidity pools. It can be used for trustless creating, maintaining, and settling of hedge contracts.
What are hedge contracts?
They are an options-like on-chain contract that gives the buyer the right, but not the obligation, to buy (call) or sell (put) the underlying asset (such as ETH or WBTC) at a specific price on or before a certain date.
Traders often use options to hedge their positions or sometimes purely for speculation. They are a commonly used trading product in traditional finance as they allow traders to implement robust risk management strategies.
Hegic is bringing the vital financial building block of options trading to the realm of Ethereum DeFi and it’s doing it in a permissionless and non-custodial manner that’s entirely on-chain – as all DeFi products should be.

How Hegic Protocol works

Key Hegic Features

• Non-custodial 24/7 global options trading
• Verified on-chain settlement of each option contract
• Choose any strike price for WBTC or ETH Call / Put options
• Exercise at any moment during the period of holding a contract
• Exercising is guaranteed by the liquidity locked on an option contract
• Censorship-resistant protocol without a KYC, email, or registration required
• Earn yield on WBTC or ETH as one of the liquidity providers
• Liquidity auto diversification among all the contracts for the options writers

2. Who and When Created Hegic?

Hegic Founder, Molly Wintermute

Hegic was created by anonymous DeFi builder, Molly Wintermute, who released the first version of Hegic on February 2, 2020. 
Shortly after its release on April 23, an anonymous DeFi hacker exploited a bug in the code which locked nearly $48k of users’ funds in the project’s smart contracts. Thanks to the support from early contributors, Wintermute was able to refund all affected users.
Shortly later in early May, Wintermute launched a new version of Hegic which was also unaudited. However, a month later with almost $40k locked on the platform, an audit did come through and the platform has been operating without any code exploits ever since.
Not much is known about Molly Wintermute, but the anonymous DeFi builder did divulge a little bit of information in an interview with The Defiant:
The anonymous creator said:

“I’m a person with no social capital or reputation in the crypto and DeFi spaces and I’m building the Hegic protocol from scratch. The crypto community can only judge me by what they can see by themselves in my code.”

Another quote from Wintermute, which shows her character come through and exemplifies why she chose to deploy on mainnet fast and stay anonymous is:

“The renaissance of crypto comes when devs are starting to build and deliver new protocols and products that people want instead of just writing tweetstorms or discussing fancy ideas and concepts on podcasts for years.”

Expanding on this point she said:

“One protocol built and shipped in mainnet is worth a thousand projects whose creators are developing them for years and playing with new approaches that they find while attending different hackathons.”

All in all, Molly Wintermute appears to be an intelligent programmer with some awfully similar attributes to that of Andre Cronje of Yearn Finance, they both “test in prod”.
As a cherry on the cake for Wintermute's credibility, it's worth highlighting the partnership with Andre Cronje himself in a $3M developer fund.

3. What is $HEGIC Token Used For?

Hegic (HEGIC) logo

The native cryptocurrency of the Hegic Protocol is $HEGIC – an ERC-20 token used primarily for the distribution of settlement fees collected by the Protocol between $HEGIC token holders, as well as in the protocol’s on-chain governance.

$HEGIC Token Use Cases:

• Distribution of Settlement Fees
• On-Chain Governance 
• Hedge Contract Discounts 
• Priority Unlocks for Writers (Liquidity Providers)

Distribution of Settlement Fees
Settlement fees that accrue on Hegic from users’ buying and selling options are distributed between $HEGIC token holders who stake their tokens. 
The Hegic Protocol charges a 1% settlement fee on all options, which is distributed to $HEGIC stakers as a form of passive income. A minimum of 888,000 HEGIC is required to stake in a lot on the network and there is a maximum of 3,000 lots (2.664 billion tokens) that can be staked at any given time.
$HEGIC token holders with fewer than the minimum 888,000 HEGIC required to stake can stake in third-party staking pools.
On-Chain Governance
$HEGIC tokens are used in HIPs (Hegic Improvement Proposal) for governance purposes. $HEGIC token holders can vote to change hedge contracts rates, settlement fee size, strike price multipliers, assets supported by hedge contracts, and more.
Hedge Contract Discounts
$HEGIC token holders receive discounts of up to 30% on the rates for holding hedge contracts. To receive the discount, users simply have to hold $HEGIC tokens on the same ETH-address that they use to activate hedge contracts.
Note: The market value of $HEGIC tokens on the holder’s ETH-address should be the same or higher than the strike price of the hedge contract to receive a discounted rate.
Priority Unlocks for Writers (Liquidity Providers)
Writers, otherwise known as “sellers” or “liquidity providers” benefit from priority unlocks of their liquidity when they hold $HEGIC tokens on the same ETH-address that they use to provide liquidity.
Note: The market value of $HEGIC tokens on the writer’s ETH-address should be the same or higher than the liquidity provided to the pool to have a no delay, priority unlock.

4. What are the main products of Hegic?

Hegic Options Contracts Interface

The main product of Hegic is the buying of call and put options as an individual holder (buyer) and the selling of call and put options as one of the writers (liquidity providers).
Holders buy call and put options for profits or to hedge their positions. 
Writers sell call and put options as one of the liquidity providers to earn yield. 
But what exactly are Options anyway?
Options are a contract that gives the buyer the right, but not the obligation, to buy (in the case of a call option contract) or sell (in the case of a put option contract) the underlying asset (Hegic currently supports ETH or WBTC) at a specific price on or before a certain date.

Hegic for Holders

Hegic ETH Call Option:
An ETH call option is an option contract giving the owner the right to buy a specified amount of ETH at a fixed price within a certain time window.
For example, a holder may buy a single ETH call option that gives them the right to buy 1 ETH at $450 (the strike price) up until the expiry date in three weeks. If they paid $10 for this call option and during the time window of holding the price of ETH, it rises to $500, a holder can choose to exercise their contract (buy 1 ETH at $450) and earn $40 in net profits.
Alternatively, if the price of ETH is below the strike price of $450, say $400, then the call option buyer loses the $10 premium paid. This is the maximum loss.
Hegic ETH Put Option:
An ETH put option is an option contract giving the owner the right to sell a specified amount of ETH at a fixed price within a certain time.
For example, a holder may buy a single ETH put option that gives them the right to sell 1 ETH at $450 (the strike price) up until the expiry date in three weeks. If they paid $10 for this put option and during the time window of holding the price of ETH, it falls to $400, a holder can choose to exercise their contract (sell 1 ETH at $450) and earn $40 in net profits.
Alternatively, if the price of ETH is above the strike price of $450, say $500, then the call option buyer loses the $10 premium paid. This is the maximum loss.

Hegic for Writers

Writers (liquidity providers or LPs) can sell call options to earn $ETH and they can sell put options to earn $DAI. Additionally, writers can also earn $HEGIC liquidity mining rewards for providing $ETH or $DAI to these pools.
Sellers of Call Options can earn up to 29.25% APY paid out in ETH by providing ETH to the call options liquidity pool. 
Sellers of Put Options can earn up to 29.25% APY paid out in DAI by providing DAI to the put options liquidity pool. 
In both cases above, the rewards writers (LPs) receive is based on their share in the pool and the ETH and DAI rewards come from the premium that call and put option buyers pay for their Hegic contracts. 

5. Who can use Hegic Options?

Hegic Options can be used by:

• Holders
• Traders
• Miners
• Noobs

BTC and ETH Holders
Long-term Bitcoin and Ethereum holders can use Hegic Options to hedge against the downside risk of holding onto their BTC or ETH. If they have no intention of selling their BTC or ETH bags, they can buy a WBTC or ETH put option to protect the value of their assets.
BTC and ETH Traders
If a trader opens a long position on BTC or ETH, they can hedge against this trade by buying a BTC or ETH put contract in order to protect the position from the potential losses. Alternatively, if a trader opens a short position, they can hedge against this trade by buying a call contract to protect their position from a potential loss.
BTC and ETH Miners
Miners can hedge the value of their future mining revenues using BTC or ETH put options if they are unsure they will have enough mining profits to cover their mining farm expenses.
BTC and ETH Noobs
If you’re new to Bitcoin and Ethereum and are skeptical that the price of your new BTC or ETH purchases will fall, then you can buy a BTC or ETH put option to protect the value of BTC or ETH and have a piece of mind.

6. Where to Buy Hegic Options?

Hegic options can be bought on the Hegic website homepage with no KYC or depositing of BTC or ETH onto the platform. You can buy Hegic options directly from your Web3 crypto wallet by connecting it to the platform. 
Hegic supports MetaMask, MyEtherWallet (MEW), Authereum, UniLogin, WalletConnect, and Burner Connect for the connection of your Ethereum account to the Hegic platform in a secure and trustless manner.
You can access in-depth documentation on where and how to buy Hegic options here.

7. Where to Store $HEGIC?

MetaMask wallet website homepage

Hegic (HEGIC) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store HEGIC in any ERC-20 token supported wallet.
However, the best wallets for storing HEGIC are non-custodial Web3 wallets that provide seamless access to the best DeFi applications, like the Hegic. 
That said, DeFi wallets are the best for storing HEGIC because the token is widely used and supported in the Ethereum-DeFi ecosystem. 

Hegic (HEGIC) Wallets:

• MyEtherWallet (MEW) (web)
• Metamask (web)

In addition to the above-listed wallets, Hegic (HEGIC) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.

8. Where to Buy & Sell $HEGIC?

Hegic (HEGIC) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade $HEGIC is through centralized and decentralized cryptocurrency exchanges.
You can buy and sell HEGIC with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy HEGIC with ETH, or stablecoins.

• Uniswap - WETH, DAI, zHEGIC
• 1inch Exchange - USDC, USDT, ETH
• 0x Protocol - USDC, WETH, DAI
• Balancer - WETH

In addition to the exchanges listed above, Hegic (HEGIC) is also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read, Let me know if I have missed something in the comments.
Ethereum DeFi Decentralized Finance DEX Exchange OptionsTrading Hegic (HEGIC)