Published
2 years ago on
October 10, 2021
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Image source: Medium.com
The Crypto Volatility Index (CVI), a VIX for cryptocurrencies, has integrated Chainlink Keepers — a decentralized transaction automation service for smart contracts — in order to automate the maintenance of tokens pegged to the Volatility indices.
Chainlink Keepers will basically trigger a supply rebase of the Volatility tokens automatically every day at midnight UTC. It will ensure that the tokens continue to maintain their peg without any manual input or centralized processes.
Created by the COTI team and Prof. Dan Galai, the creator of the original VIX, as a “market fear index” for the cryptocurrency market, this Index tracks the 30-day implied volatility of Bitcoin and Ethereum.
The index ranges between 0 and 200 and is based on a Black-Scholes option pricing model that combines the implied volatility and market expectation of future volatility of crypto option prices together.
By providing an insight into the volatility of the market, CVI allows traders to develop strategies for short-term gains and hedge their portfolio against intense price fluctuations, which is inherent to the crypto market and is much heightened than the traditional market.
Decentralizing The Index
The team has launched its first volatility token called ETHVOL, which is pegged to the Ethereum Volatility Index. To maintain ETHVOL’s peg, the Crypto Volatility Index uses a rebasing mechanism, where every time a rebase is triggered, users receive ETHVOL tokens directly in their wallet based on the latest change in the Ethereum Volatility Index.
Another Volatility token called CVIVOL is soon to be launched as well. It will be pegged to the CVI index. CVIVOL token will be tradeable on Polygon-supported decentralized exchanges (DEXs) such as QuickSwap. Polygon is a fast-growing Ethereum scaling solution that has $4.54 billion in total value locked (TVL) and supports more than 70 projects, according to DeFi Llama.
“Rebases are paid for by funding fees that then get redistributed to users based on them having a long or short position during the rebase,” as per the project.
Every time a rebase is needed to maintain the peg, an entity needs to call CVIV’s smart contract on-chain to trigger the rebase function to run.
To decentralize CVIV, it has opted to outsource the process to Chainlink Keepers, which perform the off-chain computation to check for predefined conditions, which when encountered, calls on-chain functions.
A Natural Next Step
The CVI team has chosen the popular oracle solution Chainlink because it is a decentralized network run by the time-tested and professional DevOps teams powering Chainlink Price Feeds.
Chainlink’s decentralized oracle networks are the most popular solution used in the crypto market which is helping secure tens of billions of dollars in value across hundreds of applications and across multiple blockchains.
“Integrating Chainlink Keepers was a natural next step after using Chainlink Price Feeds to access high-quality options data used in the CVI volatility index calculation,” said Shahaf Bar-Geffen, CEO of COTI.
COTI is a “finance on the blockchain” ecosystem designed to solve the challenges of centralized finance in terms of fees, latency, global inclusion, and risk along with the issues of clogging, complexity, and fees faced by decentralized finance (DeFi).
The protocol solves these issues by introducing a new type of DAG-based infrastructure that is fast, private, inclusive, scalable, has low cost, and is optimized for finance.
With a market cap of $464 million, the cryptocurrency COTI is trading at $0.534, as of writing, up 1663% in the past year. The token hit a new peak just less than ten days back at $0.67.
Popular DeFi Oracle Solution
COTI’s CEO Ben-Geffen, too, recognizes the high potential of Chainlink Keepers. He has said, “Chainlink Keepers are reliable, decentralized, and seamless to integrate, ultimately offloading manual labor from our developers while still providing strong assurances that our volatility tokens stay pegged to the underlying CVI index.”
Optimized for low costs and decentralized security to avoid single points of failure makes Chainlink Keepers an ideal trust-minimized solution to keep the Volatility tokens reflective of current market volatility.
By performing off-chain computations and generating calldata verifiable by smart contracts, it also allows developers to build advanced, trust-minimized dApps at lower costs.
Additionally, Chainlink Keepers boats of high uptime even during extreme network congestion and market volatility.
Chainlink’s native token LINK is a $12.5 billion cryptocurrency trading at $27.24, up over 130% YTD but down over 28% from its early May all-time high of about $53.
DeFi blue-chips like Aave, Sushi, Synthetix, Compound, 1Inch Network, Ampleforth, and many others like Crypto.com, Paxos, Fantom, Swipe, Bancor, dYdX, Perpetual Protocol, Flexa, and PancakeSwap are among its users.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
