Hedgehog — an algorithmic hedging protocol. The goal of the project - to provide a fully decentralized chain hedging against the depreciation of chain assets. It aims to do this with one-way automated market makers.
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Description of the Hedgehog project
SAM is based on AMM with the difference that there is only one asset in the market. The other side of the market - the hedging token (HasSet), minted on the deposit and burned on withdrawal. An exponential relationship curve is used for the hedgehog. Because of this, users who deposit later will receive fewer hAssets. Whereas the hAssets of early deposit increase in value. This means that hAssets are inversely correlated with the assets, deposited with the hedgehog. This allows SAM to be a predictive market for asset depreciation.
Hedgehog is great for dApps that have microtransactions, anything to do with gaming or signing a lot of data requests. Since transactions and signatures are accepted automatically, this reduces the time users wait between actions in the DApp.
Below is an example of a user who hedges an expected decline in the price of ETH, using a hedgehog (hWETH):
| 1. | Users A deposit WETH and hWETH due to the expectation that ETH will depreciate in value. |
| 2. | User B deposits WETH and hWETH in anticipation of further depreciation of ETH.. |
| 3. | User A burns hWETH and outputs WETH because they expect ETH to no longer depreciate. |
| 4. | The hWETH price increased due to the deposit of User B. As a result, User A has withdrawn more WETH. |
User A has successfully calculated the market and insured against the decline in the value of ETH by getting more WETH in step 3. Like most markets, this is a zero-sum game where User B has an unrealized loss now. If user B was correct and more people deposited after him due to the expected decline, he can withdraw more WETH as well.
Additional information
The developers provide an introductory document on the site. With its help, you can study in detail all features of the project.
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