Yield-Enhanced Mining-Backed On-Chain Forwards
Introduction to Yield-Enhanced Mining-Backed On-Chain Forwards
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Introduction to Yield-Enhanced Mining-Backed On-Chain Forwards
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Let’s break it down word by word,
On-chain forward: An $ATH forward contract allows buyers to purchase $ATH today, with the purchased amount delivered at a future date, 100% settled using smart contracts.
Yield-enhanced: Buyers purchase at a 10% or 20% discount off the current market price, immediately boosting returns.
Mining-backed: The purchased $ATH is generated from underlying compute resources running the $ATH mining algorithm, making the acquisition cost lower than buying directly from the spot market.
Below are returns and APY of the 90-day & 180-day yield-enhanced mining-backed on-chain forwards
Margin-free leveraged long-position
To take a leveraged position, one would typically need to provide collateral to amplify potential gains (and losses). The yield-enhanced mining-backed on-chain forwards on PINGPONG offer buyers a 10%-20% discount from the current market price, effectively giving buyers the same amplified gain effect as a slightly leveraged long position—without requiring collateral and without risking the entire position.
**While comparing different financial instruments is like comparing apples to oranges, here, we are discussing the gain/loss effects & risks of these different instruments.
Guaranteed entry
Buyers could place a bid in DEX/CEXs with a desired price, however, these bids at lower price points may never be fulfilled.
Purchasing the yield-enhanced mining-backed on-chain forwards on PINGPONG gives buyers a guaranteed entry at a 10% or 20% discount from current market price. These purchased tokens are not from exchanges, they are mining rewards from the underlying compute resources running mining algorithms.
Timing
According to $ATH’s historical price data, the current price is at the bottom, which gives buyers a guaranteed, margin-free, yield-enhanced entry to long $ATH.
Counterparty risk
Miners are issuers of the yield-enhanced mining-backed on-chain forwards.
PINGPONG is the exchange that builds the on-chain protocol for facilitating the buying and selling of these forwards.
In traditional finance, third-party custodians, intermediaries, brokers, and exchange clearinghouses handle settlements and enforce penalties in the event of a default.
Counterparty risks for all financial instruments traded on PINGPONG are largely minimized via PINGPONG’s trustless on-chain clearing protocol. In the case of yield-enhanced mining-backed on-chain forwards, issuers/sellers deposit up to 55% of the total issued forward contract value into PINGPONG’s ClearingHouseFactory on-chain contract. When buyers make a purchase, funds are locked in a smart contract. Issuers/sellers are required to deposit the total amount of $ATH specified in these forwards by the maturity date. At maturity, the contract will automatically either send the buyer’s funds to the seller’s designated address, and the $ATH deposit will be sent to the buyer’s address; or, in the event of a seller default, the seller’s deposit will be sent to the buyer’s address along with a 100% refund to the buyer.
Liquidity risks in the secondary market
If the secondary market lacks sufficient buyers and sellers, it may be difficult for holders to exit positions without a discount, leading to potential losses or lower-than-expected returns.
Price volatility of the underlying asset
Since the forward's value is tied to $ATH, any significant drop in $ATH’s price can reduce or eliminate the anticipated returns, making the forward less valuable at maturity.
