Flexible Leverage and Tokenized Volatility Trading Coming To DeFi

The options for investment in decentralized finance are forever expanding, and two protocols are bringing new products to the table.

The first product was introduced in a March 18 announcement. The Index Cooperative, in collaboration with DeFi Pulse, unveiled the launch of a new product called the Flexible Leverage Index, or FLI, which is pronounced “fly”.

According to the blog post, it is a structured product in ERC-20 format that enables traders to automate a target leveraged exposure in a completely decentralized manner.

Adding Safety To Leverage

Leveraged trading is not for the faint-hearted and can result in massive liquidations for many uninitiated traders. The Flexible Leverage Index was created to address those risks and to make the use of leverage safer and easier to maintain, the blog post added.

FLI uses a strategy built on the Set Protocol and Compound Finance that amalgamates collateralized debt management into one index represented as an ERC-20 token. FLIs are initially available for ETH but will be created and launched for other assets on lending protocols, such as wBTC, YFI, and LINK.

The protocol explained how the safety nets would work:

“FLI is designed to absorb major volatility spikes, and flexibly rebalance to ensure that collateral levels stay above liquidation thresholds. The FLI also utilizes an emergency delivering mechanism to add additional safety for users in the event of a black swan event.”

FLI is also one of the first fully-collateralized leverage tokens which is redeemable into its components, which allows for a better risk profile than relying on synthetic leverage.

According to CoinGecko, the ETH2X-FLI token, which is only tradable on Uniswap, was trading at a little over $100 at the time of writing.

Volmex Secures Big VC Backing

The second DeFi product comes courtesy of Volmex Finance, which has just secured a seed round backed by big venture capital players such as Alameda and Three Arrows Capital.

The project aims to bring volatility hedging to Ethereum with the launch of an index designed to measure the 30-day implied volatility of Ether called the ETHV Index v1.

Traders can buy or sell the contracts depending on whether they think Ethereum market volatility will increase or decrease. The team elaborated:

“Volatility derivatives are a core pillar of modern finance, as they provide a cost-effective means for hedging market volatility risk. volmex.finance brings volatility hedging to Ethereum, unlocking a myriad of new DeFi applications and building blocks.”

The protocol also has a Bitcoin-based volatility index which operates in a similar manner.

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