Covered Call Option

Last Updated on Mar. 6, 2024

Ducklend Protocol exclusively offers a decentralized financial product called Covered Call Options. Let’s delve deeper into our services:

Ducklend can be Viewed as a pawnshop for cryptocurrencies, where you can pawn your financial assets in exchange for fiat stablecoins such as USDC/USDT.

When you engage in a pawn transaction, we provide you with a pawn receipt based on the current market conditions. This receipt includes the market price when the position is opened, the daily interest payable, and the maximum number of days the pawn can last.

If we initially agree on a maximum redemption period of 30 days, you can redeem your pawned assets by paying the interest accrued. Of course, if the receipt expires and you choose not to redeem your original assets, you don't have to pay the interest. Your collateralized assets will then be manually settled by arbitrageurs on the platform.

But what if you don’t have assets to pawn? Can you still purchase a receipt? The answer is yes. The Ducklend Protocol also offers flash loan services to pawn assets on your behalf.

Specifically, in exchange for fiat stablecoins, you apply for assets from the Ducklend flash loan pool, pawned at the Ducklend pawnshop. The protocol automatically exchanges the fiat stablecoins for the original assets in exchange for repaying the flash loan.

So, what do you pay, and what do you gain in this process?

You need to cover the difference in asset value; the stablecoins you get from pawning assets will be less than the amount loaned. The trade fails if you cannot repay the loan in the same transaction, meaning you must cover this cost. This expense is also the cost of acquiring the pawn receipt.

However, through the flash loan service, you obtain a certificate of rights to redeem the collateralized item by paying a fixed interest someday.

Imagine that if the value of your collateralized assets significantly increases, you can redeem the collateral from the pawnshop by paying a small amount of interest, thereby realizing a profit from the price difference. If the receipt expires and the price of the collateralized assets falls, you are not obligated to settle the receipt; you only paid a small fee at the opening and have no redemption obligation.

Our decentralized pawn service essentially allows you to purchase a covered call option.

Ducklend, a native fully on-chain protocol, has opened a pawnshop on the blockchain, bringing an innovative product to decentralized finance that is "native on-chain." Until now, all so-called decentralized option products have been subject to human control, but Ducklend has achieved this breakthrough.