Asset backed protocol
Wasabi is a leveraged, asset-backed trading protocol. Trade long, short, and make money on your favorite tokens, starting with long-tail assets like meme coins and NFTs.
Long-tail assets have unlimited upside potential, and perps relying on synthetic indices can't appreciate.
Asset-backed derivatives offer users the security of owning an asset in place while gaining the benefits of leverage. This allows market participants to easily and affordably hedge, earn and speculate on their favorite tokens.
There are few different derivatives of the product in the range: Wasabi Perps, Wasabi Options, Liquidity Aggregation (Buy Now - Pay Later).
Perp finance
Wasabi DeFi perps are asset-backed markets backed by ETH-ERC20 pairs. The number of ETH and ERC-20 tokens in Wasabi LP vaults limits open interest. Credits are provided from the LP vaults. The liquidation of these credits is determined by the off-chain order book and the price of the index on the chain.
Long-tailed assets, known for their limited supply and high volatility, present challenges for synthetic derivatives. However, their significant value and price volatility make their derivatives attractive for leverage and hedging.
Wasabi crypto perpetual contracts (perps) are collateralized by traded assets, guaranteeing stability and eliminating counterparty risk. Liquidity providers can deposit ETH, meme coins, and fractional NFTs to earn interest on the backed tokens.
Longs. Traders open long positions with ETH. The protocol then issues additional ETH to purchase the ERC-20 token, which is subsequently deposited into the LP pool as an open position.
Shorts. Traders open short positions using ERC-20 tokens. The protocol provides them with additional to buy ETH. These are then deposited into the LP pool as an open position.
When the position is closed, the collateral is exchanged for payment of principal, interest and fees.
For long positions, all collateral will be sold. The debt and payments will be made in ETH.
For short positions, a portion of the collateral will be used to redeem the underlying ERC-20 tokens. Interest, fees and payments will be made in ETH.
The TP/SL feature enables traders to automate their strategies by setting predefined prices for taking profits (TP) or limiting losses (SL).
Liquidation
Emergency liquidation is initiated when the value of the collateral falls below a set threshold. In this case, the open position is closed and the collateral is sold. The funds from the sale are used to cover the loan, accrued interest, any applicable fees and the liquidation penalty. If any funds remain, they are returned to the trader.
Liquidation occurs when the value of the position exceeds the debt by only 5%. After liquidation, the entire remaining value of the position after deducting the debt is credited back to the trader's account. In addition, a liquidation penalty is imposed on the trader. This penalty serves as a deterrent, encouraging traders to close their positions in time to avoid liquidation.
The criteria used to determine when to post margin calls and initiate liquidation are based on various factors, including market capitalization, the impact of large orders on price, the depth of market liquidity, and the distribution of holders.
Index Price
Wasabi Perps are asset-backed and don't need a token price to operate. However, the off-chain server tracks the on-chain token price, the index price, to liquidate positions and avoid bad debts. This creates a more reliable and less manipulated liquidation mechanism.
Insurance Fund
When the market is unbalanced, meaning it is heavily tilted towards either buying (long) or selling (short), LPs face a unique scenario. They can earn higher interest rates due to increased demand for leverage, but this comes with a greater risk of accumulating bad debt if the market moves against them.
To manage this risk during periods of strong market polarization, a portion of certain fees earned under the protocol is allocated to an insurance fund.
The insurance fund serves as a protective buffer. It is designed to cover potential losses that could arise under extreme market conditions, thereby protecting the interests of LPs and the overall health of the protocol.
Vaults
Traders can open positions using leverage. They make an initial deposit and borrow funds from LP vaults. Interest on the loans will be calculated off-chain based on utilization rates and other market factors. The maximum amount of leverage depends on the token pair depending on the depth of liquidity and price impact. Leverage is provided from LP vaults.
Wasabi vaults use the ERC-4626 tokenized vault standard.
ERC-4626 is a standard that optimizes and unifies the technical parameters of yield-bearing vaults.
To deposit funds into Wasabi LP pools, LPs deposit tokens into the vault to purchase shares of the vault. The deposited tokens are used to provide liquid credit to traders. Once a position is closed or liquidated, the vault earns interest by increasing the price per vault share. In the unlikely event of an untimely liquidation, a loss will be recorded, lowering the share price.
By selling their shares back to the pool, LPs can receive the interest earned and the original deposit amount.
NFT trading platform Collect
Collect provides seamless collection and management of 404 tokens.
What is 404? 404 is a hybrid token standard that combines fungible tokens and NFTs. Every 1,000 units of fungible tokens from 404 contracts automatically mints NFTs. These increments of fungible tokens and NFTs are inherently linked and “travel” with each other. The linked NFT returns to the contract (stack) when the token balance falls below 1,000 increments (e.g. 999 tokens).
The Collect interacts directly with tokens on AMM liquidity pools (e.g. Thruster, Uniswap), allowing users to see the NFT stack. The Collect page displays the NFT that will appear when a user buys the next 1,000 units of fungible tokens on AMM. This combines the liquidity of token trading and the experience of collecting NFTs into one interface. Providing users with the tightest bid and ask spreads and the highest liquidity when collecting NFTs.
NFTs on the collection page are listed by their “depth” in the contract stack. The deeper an NFT is in the stack, the greater the number of swings required to open it.
Features
- Buy: Easily keep track of which NFT is picked up next from the stack and snipe rare items.
- Sweep: Quickly and easily buy multiple NFTs from the stack.
- Sell: Choose which NFTs to sell, keeping the ones you like.
- Stake: Choose NFTs to stake to earn yield and additional rewards.
Earn Crypto (Stake)
Wasabi allows everyone to stake long-tail assets and earn without permanent losses transparently. You don't need to deposit a pair, just the token you want to hold and earn.
Traders on Wasabi borrow money from LPs to make long/short trades using leverage. If the loan runs out, their position is liquidated. Thus, LPs always accumulate interest on the amount originally deposited.
NFT fractionalization
NFT fractionation is when you wrap your standard NFTs (ERC-721) in the BT404 standard. In this way, a semi-fungible NFT is created. One ERC-721 is represented by 1,000 fungible tokens and a 404 NFT that is inherently linked and “travels” with the fungible tokens. These tokens are backed by and can be easily deployed into one of the original NFTs.
BT404 allows fractional ownership of NFTs, which provides a lower barrier to entry and a more liquid trading experience.
Spot Trading. Buy or sell your fractional tokens directly from Wasabi's Collect page. Trades are made based on market spot prices in liquidity pools, which may differ from the floor price of deployed NFTs in the same collection - though both can be traded against each other.
Leveraged Trading. You can also opt for LONG/SHORT leveraged trading to maximize your returns. Using ETH as collateral, borrow fractions of NFT or ETH to capitalize on small price changes.
Staking Fractional NFT
You can provide liquidity by depositing your fractional tokens into vaults.
As traders take deposited tokens for leverage, your share of the vault will earn interest on the deposited token and help reduce the circulating supply of tokens.
NFT Options
Wasabi options allow NFT traders to go long or short until the expiration date without any liquidation issues.
Call Options
A call option on an NFT gives the holder the right, but not the obligation, to buy a specific NFT at a predetermined price at a later date. So, you can reserve a price to buy the NFT in the future and maximize your upside potential.
Call options on NFTs can be used in many different ways. If you feel FOMO about a collection but are not sure if the price will continue to rise, buy a call option and exercise it to buy the underlying NFT cheaper than its price. If you want to profit from your bullish bets on the floor price, you can also do so by buying call options and exercising them for a profit.
NFT call options have several key components, including:
- Collateral - this is the NFT that will be purchased if the option is exercised.
- Strike price - the price at which the holder can purchase the collateralized token.
- Expiration Date - the date by which the holder must decide whether to exercise the option.
- Premium - the price the holder pays to obtain the option.
Put options
A put option on an NFT gives the holder the right, but not the obligation, to sell a particular NFT at a predetermined price at a later date.
NFT put options can be used in a variety of ways, for example, to hedge (buy cash insurance) against the risk of falling NFT prices or to profit from a fall in the collection floor.
NFT put options consist of several key components, including:
- Strike Price - the price at which the holder can sell the NFT.
- Expiration date is the date by which the holder must decide whether to exercise the option.
- Premium is the price the holder must pay to purchase the option.
Liquidity Aggregation
Wasabi offers the most liquid NFT derivatives market through liquidity aggregation, matching buyers with the most favorable terms across all NFT protocols to provide them with long and short positions.
Anytime there is available credit, a buyer can come in and pay an upfront fee to buy an asset and repay the loan later. Wasabi's back-end uses flash loans to allow users to seamlessly lengthen or shorten desired collections without requiring the full amount of capital up front.
Once the loan is repaid, the user can take the asset back for themselves if they wish. Or they can use Wasabi's Arbitrage Tool to flip the NFT, at no additional cost to profit.
When a position is opened, the trader is given an NFT symbolizing ownership. This NFT allows them to transfer or settle the trade as they see fit without closing the loan.
