Quote Assets and oCHI Strike Price

Quote Assets and Strike Price Formula

Quote Tokens

oCHI recipients must know the quote token required for exercising the options. To buy oCHI, users must first provide liquidity to USC/ETH, CHI/ETH or both pools on Uniswap. The more liquidity users provide, the higher the discount received on oCHI. Moreover, a boost on the discount can be applied to oCHI recipients who also buy CHI and provide it to the DSO contract as a complementary asset to the LP tokens. The same rule applies here; more CHI automatically translates into a greater boost on the option's discount. To further increase the scarcity of CHI supply, the single-sided CHI received by the contract is burnt.

oCHI Discount

oCHI recipients must be familiar with the calculation of the option's discount. This element defines the strike price and exchange ratio between the quote token provided and the oCHI received. The oCHI discount is determined through a formula considering various factors, such as lock-in time, pool and CHI. The maximum discount the oCHI recipient can reach is capped at 50% on the CHI TWAP price at the time of issuance.

Time Factor

Pool Factor

CHI Factor

oCHI Strike Price

oCHI recipients have individual and customisable strike prices, which depend on their time, pool and CHI factor. Once users have provided their LP tokens, CHI to the DSO contract and specified their lock-in period, they receive a respective oCHI amount, which can be converted 1:1 into CHI when the lock-in period expires. The amount of oCHI tokens the users receive depends on the strike price. The oCHI strike price is computed using a formula considering the user's discount.

The oCHI strike price determines the user's amount of oCHI received. The higher the discount, the greater the amount of oCHI tokens the user receives.

Example: oCHI strike price calculation example

  • Assume the 1h TWAP of CHI is $1, the circulating CHI supply is 100,000,000, and CHI FDV is $100,000,000

  • The TVL on USC/ETH, CHI/ETH on Uniswap is $10,000,000 and $12,000,000 respectively

  • The target POL/TVL ratio is set at 60% and the actual weekly POL/TVL ratio is 50%

  • oCHI recipient cpecifies a lock-in period of 6 months (26 weeks)

  • oCHI recipient provides 200,000 worth of LP tokens:

    • $110,000 USC/ETH

    • $90,000 CHI/ETH

  • oCHI recipient provides burns $100,000 worth of CHI tokens

  • Time Factor: 26 / 52 * 4 = 0.125

  • Pool Factor: 110,000 / 10,000,000 + 90,000 / 12,000,000 = 0.019

  • CHI Factor: 100,000 / 100,000,000 = 0.001

    • Discount Calculation: 0.125 + min (0.019 + 0.001,0.25) = 14.5%

  • Strike Price Computation: $1 * (1 - 14.5%) = $0.855

  • Quantity of oCHI received = $300,000 / $0.995 = 350,900

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