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ETH Dragon

Product Details & Payoff Scenarios

Deposit ETH and earn a high fixed yield.

Strategic Use Cases

  • You hold ETH and want to maximize yield on your holdings

  • You want to earn yield in ETH

  • You are comfortable selling your ETH for USDC at a profit if the market conditions are favorable (+5%)

Conversion likelihoods are based on backtesting data (Jan 2023 - Jan 2024)

Payoff Scenarios

For each scenario below, assume the following:

Investor deposits 100 ETH into the 'ETH Dragon' Vault

ETH Dragon terms:

  1. Investment duration: 27-day

  2. Underlying asset = ETH

  3. Strike price = 105%

  4. APY = 25% (~2% yield per 27-day vault)

  5. ETH price on Day 1 = $1710


Scenario 1: No Currency Conversion - Deposit ETH, Receive ETH

Example scenario: ETH price movements during a 27 day period

What happens in this scenario?

  • TLDR: deposit ETH, receive ETH

  • ETH price on Day 1 is $1710 and ends on Day 27 at $1600 which is below the strike price of $1800 (105% of Day 1 price)

  • Thus the vault trade expires and no currency conversion occurs. The full principal that was deposited by the user is returned (100 ETH). The user earns ~2% yield paid in ETH (same currency as deposit)

  • Deposit and yield are automatically reinvested for compounding returns into a new 27-day vault

What is the payoff for the investor?

  • Initial deposit = 100 ETH

  • Deposit returned = 100 ETH

  • Yield earned = 2 ETH

    • APY = 25%, single 27-day vault yield = ~2%

  • Total payoff = 102 ETH after 27 days (deposit + yield)


Scenario 2: Currency Conversion - Deposit ETH, Receive USDC

Example scenario: ETH price movements during a 27 day period

What happens in this scenario?

  • TLDR: deposit ETH, receive USDC

  • ETH price starts at $1710 and upon expiry ends above the strike price of $1800 (105% of Day 1 price). This results in a 'conversion'.

  • A conversion occurs, whereby the deposited ETH is automatically sold for USDC at a 5% profit (at the 'strike price').

  • The user also earns ~2% yield, which is paid in the same currency (USDC).

What is the payoff for the investor?

  • Initial deposit = 100 ETH

    • Asset value = $171,000 @$1710 ETH price

  • Deposit returned = $180,000 USDC

    • 100 ETH sold for +5% profit @$1800

  • Yield earned = $3,600 USDC

    • 100 ETH * 2% yield = 2 ETH earned and sold @$1800

  • Total payoff = $183,600 USDC (+7.4% ROI) in 27 days

Scenario 3: Price Moves Above Strike During Trade

Example scenario: ETH price movements during a 27 day period

What happens in this scenario?

  • TLDR: deposit ETH, receive ETH

  • ETH price starts at $1710 and moves above the strike price ($1800) on day 10. However, the price at expiry ends below the strike price.

  • No conversion occurs because the payoff is calculated based on the prices at expiry of the 27-day vault.

  • The full principal that was deposited by the user is returned to them (100 ETH). The user also earns ~2% yield, which is paid in the deposit currency (ETH).

  • Deposit and yield are automatically reinvested for compounding returns into a new 27-day vault

What is the payoff for the investor?

  • Initial deposit = 100 ETH

  • Deposit returned = 100 ETH

  • Yield earned = 2 ETH

    • APY = 25%, single 27-day vault yield = ~2%

  • Total payoff = 102 ETH after 27 days (deposit + yield)

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