beincrypto.com
The latest addition to the burgeoning world of decentralized finance is a platform that aims to reduce ‘yield hacking’ by offering structured products.
Ribbon Finance has just launched to mainnet in a bid to bring structured products to DeFi and eliminate what it terms as ‘yield hacking,’ or whale arbitraging in other words.
These structured packages aim to bring multiple crypto assets into a single product that anyone can buy without worrying about the complexities of its construction.
It added that in traditional finance (TradFi), these products are highly regulated and are only available to high net worth individuals or financial institutions.
“Ribbon aims to disrupt the market for these structured products and make them accessible by anyone with a Metamask wallet.”
DeFi Yield Hacking ‘Will Run Out’
Derivatives such as perpetual swaps, options, and others have grown significantly in the DeFi space over the past year. However, the majority of these have been largely targeted to sophisticated traders with large holdings to leverage.
Ribbon wants to bring these types of investment products to the average user and eliminate the scourge of arbitraging and recursive lending which, it states, will eventually become exhausted;
“Yield hacking in its current form runs on unicorn bucks, not financial engineering, and will run out at some point.”
Ribbon aims to create structured products to serve four broad categories including volatility with options to long or short volatility of various crypto assets for speculation or hedging purposes.
Yield enhancement products claim to return three-digit APY, while principle protection-based products that guarantee a return on funds make up the third category. Finally, there will be an accumulation product that operates over time.
Ribbon Finance is targeting the retail market as opposed to accredited investors that usually get access to these types of funds;
“We envision that a large group of retail investors in crypto would want to deploy their capital in at least one of these buckets, to complement their existing positions or to generate yield on their long-term holdings.”
Strangle Option on Launch
The new DeFi protocol’s first product on mainnet launch is something called a “Strangle” option. These let users bet on Ethereum volatility by combining a put and call option. It combines these options at different strike prices, allowing investors to profit when the price of ETH goes above or beyond these thresholds. The Hegic and Opyn protocols are used to source ETH liquidity.
The announcement did not mention any smart contract audits or governance token details.