Example

Last Updated on Mar. 6, 2024

Assumptions

Elements
Symbols or Value

Trading pairs

USDC - Solana.DET (Duck Egg Token)

Solana Price (Present Value)

100 USDC

Solana Price (Future Value)

Situation A: 130 USDC

Situation B: 80 USDC

Position opening time

30 Days

Annual Rate

73%

Duck Egg Token Price

1 USDC

Leverage

1

  • Assume that the above prices and interest rates are automatically generated by the Ducklend liquidity trading pool or prices input by the oracle.

  • Suppose now we know the future Solana asset price. One is that it rises to 130 USDC, and the other is that it falls to 80 USDC.

  • Assume that the DET price does not change due to market supply and demand, and the base interest rate does not change. That is, the market already determines the interest rate.

  • The position opening period is calculated based on the Solana block height.

  • Assume the user will not exercise the option within 30 days.

1. Pawnor

  • Opens a position

    • Pawnor used the Ducklend Interface to check the voucher details, entering the pledged Solana (1 Sol) and position opening period (30 days).

    • Ducklend retrieves the current Solana real-time price (100 USDC) via the Pyth oracle to calculate cashback (~94 DET) and payable interest (~6 DET) based on the annual interest rate (73%).

    • The transaction information mentioned above is displayed to the Pawnor by the Ducklend interface.

    • If Pawnor agrees to open the position above, Pawnor will approve and confirm the transaction in the wallet.

    • Ducklend received 1 Solana and put the mortgage assets in the Decentralized Pawnshop. The Pawnshop then placed the mortgage assets into the mortgage warehouse and informed the Limited Trading Pool to issue a corresponding amount of DET (~100 DET).

    • The user is issued a redemption voucher after automatically exchanging additional DET for 94 USDC.

    • The user receives 94 USDC and a redemption voucher (Covered Call Option).

    • The redemption voucher indicates that returning 100 DET to Ducklend after 30 days will allow the user to redeem 1 Solana.

  • Redemption (Situation A)

    • If the market price of Solana rises to 130 USDC after 30 days, the covered call option has a redemption value.

    • Pawnor logs into the Ducklend Interface to view the redemption certificate, and the Ducklend Agreement displays the accumulated interest payable.

    • The user exchanges USDC for 100 DET in the restricted liquidity pool through the Ducklend Interface.

    • After the Ducklend protocol receives the interest due, it will return the mortgage assets (1 Solana) to the user's wallet.

    • User income = 130USDC - 100USDC = 30USDC.

  • Redemption (Situation B)

    • If the Solana market price drops to 80 USDC within 30 days, the covered call option will have no value. If the user fails to repay interest on time, Ducklen will initiate a Dutch auction.

2. Option Trader

  • Opens a position

    • Pawnor used the Ducklend Interface to check the voucher details, entering the pledged Solana (1 Sol) and position opening period (30 days).

    • Ducklend retrieves the current Solana real-time price (100 USDC) via the Pyth oracle to calculate cashback (~94 DET) and payable interest (~6 DET) based on the annual interest rate (73%).

    • The transaction information mentioned above is displayed to the Pawnor by the Ducklend interface.

    • The user utilized Ducklend's flash loan service to mortgage the principal, and the platform displayed the highest option fee for opening a position.

    • If Pawnor agrees to open the position above, Pawnor will approve and confirm the transaction in the wallet.

    • Ducklend received 1 Solana and placed the mortgage assets into the Decentralized Pawnshop. The assets were then transferred to the mortgage warehouse, and the Limited Trading Pool issued a corresponding amount of DET (~100 DET).

    • The DET tokens are automatically exchanged for 94 USDC and returned to the flash loan service. The price difference is charged based on the user's option fee.

    • A redemption voucher (Covered Call Option) will be generated for the user if the transaction is successful.

    • The redemption voucher indicates that returning 100 DET to Ducklend after 30 days will allow the user to redeem 1 Solana.

  • Redemption (Situation A)

    • If the market price of Solana rises to 130 USDC after 30 days, the covered call option has a redemption value.

    • Pawnor logs into the Ducklend Interface to view the redemption certificate, and the Ducklend Agreement displays the accumulated interest payable.

    • The user exchanges USDC for 100 DET in the restricted liquidity pool through the Ducklend Interface.

    • After the Ducklend protocol receives the interest due, it will return the mortgage assets (1 Solana) to the user's wallet.

    • User income = 130USDC - 100USDC = 30USDC.

  • Redemption (Situation B)

    • If the Solana market price drops to 80 USDC within 30 days, the covered call option will have no value. If the user fails to repay interest on time, Ducklen will initiate a Dutch auction.

3. Liquidity Provider

  • Inject liquidity

    • The user chooses to inject 10,000 USDC into the liquidity trading pool.

    • The Ducklend protocol will automatically buy part of USDC into DET and exchange the 1:1 value of USDC: DET into LP Token.

  • Redeem liquidity

    • The user chooses to redeem the LP Token.

    • The DET in LP Token will automatically buy USDC, and the user will withdraw the USDC in the existing trading pool according to the proportion.

  • If the value of mortgage assets suddenly drops, users' underlying assets may lose value.

  • The Ducklend protocol features an interest rate mechanism that confers users with additional returns, even in cases where the value of mortgage assets decreases. This mechanism ensures that users are safeguarded against potential losses and granted the opportunity to earn even more returns.

4. Arbitrageur

  • Auction expired options

    • The Ducklend protocol has adopted the Dutch auction mechanism to trade expired options. The primary objectives are ensuring the stability of DET interest rates and regulating interest prices.

    • If the market price of Solana drops to 80 USDC, the interest due after 30 days will be 100 DET.

    • The auction will enter Ducklend's auction list. After each Solana Block Time, the repayable interest (100 DET) will be discounted (0.2%).

    • The arbitrageur should select the auction function from the Ducklend Interface auction list to liquidate the expired option at the right time.

    • The Ducklend protocol checks whether an arbitrageur owns more than 1% of Duckcoin to confirm their eligibility.

    • If the Solana market price remains unchanged, the arbitrageur will spend 79 USDC to purchase 79 DET from the restricted liquidity trading pool via the Ducklend protocol and pay the interest owed to the Ducklend protocol.

    • Arbitrageur income = 80USDC - 79USDC = 1 USDC.

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