QuiD Protocol
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Questions Asked Often
Q1: How does QuiD compare to options AMMs like Pods? A: Like an AMM, QuiD is peer-to-pool (no order books). Options are used extensively in QuiD, but they are not represented as tokenised contracts (e.g. Series NFTs) in and of themselves. That is, unlike with Pods, there is no function in QuiD by which an option takes the form of a transferrable first-class entity (e.g. ERC 721 NFT series). As a symptom of borrowing and lending in QuiD, "invisible" options are automatically attributed to borrowers' liens. This solves Pods' chicken and egg problem of not having enough liquidity for an options marketplace because there aren't enough users, as a result of not having enough liquidity.
For instance, stablecoin ($QD) borrowers pay premiums on a put that's in the money when their collateral becomes worth less than their debt. In that situation the put is automatically exercised on their behalf by means of liquidation, thereby selling their collateral to the protocol in order to cover their remaining debt. A borrower's CR (collateral/debt ratio) effectively sets the strike for the option. Borrowing $90 against $100 of collateral sets the strike at $90. Borrowing $60 against $100 sets the strike at $60! The collateral would need to fall by 40% to execute the put. This put is quite far OTM, thus much cheaper than the first.
In Pods, you pay the premium upfront to obtain a static option. QuiD options are dynamic and fluid: adding more collateral and drawing more debt (or vice versa) will automatically re-price the borrower's option and charge a different premium over time. QuiD's options also don't expire, existing as long as there is debt. Crypto borrowers buy an "invisible call" (described in Risk Reversal Stategy). Solvency Providers don't pay premiums, but they also have in this case an "invisible put" which allows them to automatically cash settle with crypto borrowers who are shorting the crypto being lent by them. In this case, instead of being stuck with falling assets, lenders only take a 10% loss (mirroring borrowers' 10% profit).
Pods also uses a clever binary search technique to guesstimate implied volatility (for scaling options pricing up/down). QuiD instead uses a heuristic, allowing depositors to vote how much above 100% (the min capital requirement) the protocol's solvency should be to indicate their sentiment on implied volatility. If they wish to abstain from voting, they may delegate their vote to any Council member, or even a specific depositor if they so wish. QuiD also adds adjustable risk tolerance to being a Solvency Provider: akin to being an LP in Pods' cfMM framework for puts and calls clearing without an order book in the middle.
Q2: How do you keep Oracles honest and how does quiDAO fit into this? A: DAO Council members will operate Airnode instances serving QuiD's risk API, and augmenting QuiD's GF (Guarantee Fund) with API3 tokens staked by frontends/apps connecting to said Airnodes. Collectively they function as a Keeper network, whose operation includes feeding arbitrage gains from redemptions and inversions into QuiD's GF (minus a cut) that retains a "rainy day" portion of all protection premiums. In exchange QuiD's Council Members act as multi-sig trustees of the GF, beyond its functions of clearing liquidated debt in otherwise unsustainable situations, and lending miner tip money for Flashbots' bundle execution to ensure all (incl. $0 profit) $QD arbitrage clears (by securing Airnodes as the top gas bidder).
A quiDispute occurs when all Airnodes don't report the same result via their risk APIs, and an on-chain risk calculation is invoked for consensus, or vice versa (randomly triggered on-chain runs cause a quiDispute). The necessary gas is paid for auto-collectively by selling QP slashed from Airnodes whose results differed from the on-chain one, ever. QP must be staked by Airnodes, in value proportional to frontends/apps' API3 tokens staked in order to provision their weekly request quotas. Additionally, one fully on-chain, randomly scheduled risk calculation is paid for daily by quiDAO. It executes a trustless verification of all Airnodes' reported data in aggregate from their risk APIs' calculations (auto-ran by AWS every 15min, 96 per day).
Q3: How does QuiD compare to Aave? A: no aDai
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