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Acquiring CVE through Call Options

Acquiring CVE through Call Options

Unpacking Call Options

Call Options Refresher: A call option grants the holder the right, but not the obligation, to purchase the underlying asset at a predetermined price within a specific timeframe. This predetermined price is referred to as the strike price, and the defined timeframe is the expiry.
When the spot price surpasses the strike price, the call option holder gains profit by purchasing the underlying asset at a discounted rate.
Conversely, if the spot price falls below the strike price, the holder only loses the option's cost and isn't obligated to purchase the asset at a premium.

Why Call Options in Crypto?

The decision to opt for Call Options rather than traditional token airdrops is grounded in these challenges. Airdrops can potentially devalue tokens, attract less committed users, and incentivize undesirable behavior. In contrast, Call Options introduce benefits such as heightened protocol loyalty, reduced sell pressure, establishment of a natural price floor, and POL integration.

DeFi-based Call Options

As evident from the token distribution section, token allocation is not solely executed through sales or gauge emission rewards. Approximately 1% of the total tokens will be disseminated through an airdrop mechanism, while an additional 2.75% will be generated during Curvance's Beta launch phase.
This innovative concept, originally conceived by Andre Cronje in early 2021 with the introduction of oKP3R, aimed to establish sustainable incentives. The initial concept featured a fixed 50% discount and lacked Protocol Owned Liquidity (POL) generation. It essentially presented a modified version of liquidity mining with additional intricacies.
Aligning incentives between users and token holders within a protocol is a significant hurdle in the evolving landscape of DeFi. It has been for years because it involves addressing several pivotal challenges:
  • Divergent Goals: Balancing the desires of users seeking utility and token holders aiming for value appreciation.
  • Token Emission Complexity: Designing token emission strategies that keep users engaged and make the token valuable needs careful deliberation and thought.
  • Evolving Industry: DeFi keeps changing at a rapid pace and requires continuous adoption of new mechanisms to remain relevant.
  • Liquidity Challenges: Ensuring efficient markets for users while protecting token holders’ investments demands innovative liquidity solutions.
  • Governance and Decision Making: Achieving effective governance structures that allow for inclusive decision-making is pivotal.
  • Loyalty and Value Creation: Successful protocols intertwine loyalty and value generation, fostering mutual benefit.
  • Incentive Sustainability: Striking the balance between short-term attraction and long-term incentive sustainability is a persistent endeavor.

CVE Call Options

The call options employed by Curvance are of the American type, granting the option holder the flexibility to exercise them at any point until expiry. The following variables define these call options:
  1. 1.
    Strike Price: 50% discount on the final LBP token price.
  2. 2.
    Expiry: Six weeks after the conclusion of the LBP auction.
  3. 3.
    Valuta: Upon exercise, users contribute USDC to the protocol, which contributes directly to the DAO while acquiring the underlying CVE tokens.