SECTION 1: APPLICANT INFORMATION
Applicant Name: Toubi
Project Name: Y2K Finance
Project Description:
Y2K Finance is an binary option protocol designed to create a marketplace for tail risks in DeFi, including pegged assets (such as stablecoins (e.g. USDC, USDT) and wrapped assets (e.g. WBTC, stETH)), directional markets, and real-world events that could pose a risk to the DeFi ecosystem. Market participants have the ability to robustly hedge or speculate on the risk of a particular asset. Since the launch of v1 ‘Earthquake’ vaults in late 2022 and v2 ‘Earthquake’ vaults in mid 2023, Y2K Finance has generated more than $110 million in binary options volume. Earthquake vaults, which settle weekly and monthly have experienced 21 depegs resulting in more than $9 million paid out, providing hedgers and speculators alike with large payouts.
At launch, Y2K Finance Earthquake vaults covered 3 assets, but many more have since been added, with more than 13 assets at the present. In addition to Chainlink, which Y2K Finance has supported since launch, more oracle providers have since been onboarded, including Redstone, Pyth and UMA. Y2K Finance has also continued to assess, identify and add new markets, including venturing outside of stable assets - looking at volatile assets and other market indicators, such as volatility and dominance. The addition of Earthquake v2 vaults added additional flexibility and improved UX, improving the ease of use of Y2K Finance’s option products.
Team Members and Qualifications:
Crypwalk - Founder
Last Oracle - Head of Product
3xHarry - Head of Engineering
Bumzy - Head of Marketing
Knot Here - Head of Strategies
Carnation - Head of Business Development
0xHarbs - Senior Smart Contract Engineer
Project Links:
- Website: https://www.y2k.finance/
- Twitter: https://twitter.com/y2kfinance
- Discord: Y2K Finance
- Docs: Overview - Y2K Finance
- Github: Y2K Finance · GitHub
- Medium: Y2K Finance – Medium
- Youtube: https://youtube.com/@y2kfinance
Contact Information
TG: Telegram: Contact @y2k_finance
Twitter: @y2kfinance
Email: info@y2k.finance
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes
SECTION 2: GRANT INFORMATION
Requested Grant Size: 500k ARB
Grant Matching: Y2K Finance will continue to incentivize vaults with Y2K alongside the ARB provided by this grant.
Grant Breakdown: 100% incentivizing Y2K Finance’s weekly Earthquake markets
| Name | Grant budget | Including |
|---|---|---|
| Core markets incentives | 50% | USDT, FRAX, LUSD, USDC |
| Nascent markets incentives | 50% | stETH, BUSD, DAI, wBTC, USDD, MIM, TUSD, VST, MAI |
Funding Address: [TBC]
Funding Address Characteristics: [TBC]
Contract Address: The entirety of the ARB allocation will be distributed with farm contracts deployed for each Earthquake market. No contract addresses can be shared before the distribution is actually set up, but Y2K Finance will maintain a list all of them up to date during the entire duration of the campaign.
SECTION 3: GRANT OBJECTIVES AND EXECUTION
Objectives:
Primary objectives:
- To attract and onboard new users to Arbitrum
- Increase protocol sequencer fees paid to Arbitrum
- Drive Arbitrum ecosystem growth
- Bolster Y2K Finance vault liquidity to provide more accurate insurance pricing and better hedging and speculation for users, so as to make Arbitrum the place for derivatives
- Make Arbitrum the most prominent execution environment for DeFI disaster options, improve confidence of sophisticated market makers to provide liquidity to the Arbitrum ecosystem by using advanced hedging strategies
Key Performance Indicators (KPIs):
Y2K Finance will track and report the following KPIs on an aggregate and vault basis:
- Volume: this represents the most significant measure to Y2K vault usage and given that Y2K vaults settle on a weekly basis, provides the same information as TVL
- Weekly Active Users: This helps us understand whether we are attracting more users as opposed to larger deposits
- Number of transactions: This helps us understand how the incentives are driving Arbitrum usage
- Sequencer fees: Ibid
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
Y2K is a platform for users to hedge and speculate with respect to pegged assets. Pegged assets are central to the current crypto meta of stablecoins and wrapped assets like stETH. Being able to hedge and speculate on these assets is of principal interest in crypto.
The presence of oracles and low transaction fees make Arbitrum the most attractive place for people to get such exposure, hence why Y2K Finance launched on Arbitrum in the first place.
With this ARB grant, Y2K Finance seeks to incentive its options markets so as to attract volume and onboard new users to Arbitrum, boost insurance liquidity on Arbitrum, support Arbitrum native projects (such as Vesta, GMX, Gains) and make Arbitrum the place for users to get binary options exposure.
Liquidity in options markets are of paramount importance for their smooth functioning. As options markets become more liquid, they become more attractive. This chicken and egg problem could potentially be solved by ARB emissions to help bolster liquidity in Y2K Finance markets.
Y2K Finances encourages third parties to build upon its primitives. Y2K Finance is working on a builder programme, which concurrently to the STIP ARB grant aims help to make Y2K Finance options more accessible, useful and cost efficient for users.
Justification for the size of the grant:
Y2K Finance has been aligned with Arbitrum since day one, launching on Arbitrum and being only on Arbitrum, and is one of the Arbitrum OGs. Y2K Finance has shown consistent innovation and is working to contribute to the Arbitrum ecosystem, through builder programmes and integrations with other Arbitrum DeFi protocols like GMX, GNS and Vesta. Y2K is the leading binary option protocol designed to create a marketplace for tail risks in DeFi. In order to achieve the required critical levels of liquidity to kick off the liquidity flywheel, important incentives are required.
Execution Strategy:
As explained above, the ARB grant would be used to incentivize volume on Y2K Finance Earthquake vaults.
| Name | Grant budget | Including |
|---|---|---|
| Core markets incentives | 50% | USDT, FRAX, LUSD, USDC |
| Nascent markets incentives | 50% | stETH, BUSD, DAI, wBTC, USDD, MIM, TUSD, VST, MAI |
Core markets represent Y2K Finance’s most successful and popular weekly vaults.
Nascent markets represent new vaults which are still growing and finding market fit.
The budget split represents the desire to incentivize markets with more proven market fit as opposed to those which have not fully demonstrated it.
The ARB grant awarded will be used to incentivize weekly Earthquake markets during the STIP period, with aim at boosting liquidity so as to start the options liquidity flywheel.
The same amount of ARB will be distributed weekly (grant_amount/number_of_weeks).
The weekly amounts distributed will be split as per the budget above. The ARB amounts budgeted for the core and nascent markets split equally between the active markets in each category.
This sample budget sets out the proposed ARB emissions. It is a sample budget as the start date of the program depends on when ARB emissions can begin.
Earthquake vaults can be incentivized (either directly or by farm contracts), so that users who deposit into either the premium or collateral side of the vault can claim these incentives once the vault settles. ARB incentives from the STIP will be distributed via this mechanism, therefore directly and proportionally incentivizing volume in these vaults.
Grant Timeline: Set out here.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? Yes
SECTION 4: PROTOCOL DETAILS
Is the Protocol Native to Arbitrum?: Yes
On what other networks is the protocol deployed?: None
What date did you deploy on Arbitrum?: 7 November 2022
Protocol Performance:
Dune dashboard link: https://dune.com/toubi/y2kpolicy
- Volume
- More than $110 million in binary options volume since launch
- Markets
- 13 assets over 21 markets, with more assets and markets being added
- Depegs
- 21 depegs resulting in more than $9 million paid out
- Fees
- More than $670k in fees collected, with 50% distributed to vlY2K holders
- Y2K token
- Y2K Finance is governed by the $Y2K governance token. There are currently around 2,800 unique holders. Y2K can be locked for 16 weeks or 32 weeks in exchange for vlY2K. vlY2K benefits from Y2K emissions and 50% share of protocol fees. There are currently around 600 unique vlY2K holders.
Protocol Roadmap:
Y2K Finance is in the process of developing:
- Strategy vaults - these vaults aim at automatic yield strategies on one or more Earthquake vaults simultaneously, so as to facilitate the hedging and speculative activity.
- Earthquake v3 - this will redefine how users are able to hedge and speculate on pegged assets, volatile assets and any other oracle determined outcome. This should significantly improve the addressable market, drastically improve UX - resulting in an overall better product for users.
Audit History:
All v1 and v2 audits are available here.
SECTION 5: Data and Reporting
Is your team prepared to create Dune Dashboards for your incentive program?:
Yes, Y2K Finance contributors will create vault level Dune dashboard to track the grant usage and all KPI metrics. As incentivized vaults are settled on a weekly basis, weekly granularity as opposed to daily is more relevant for Y2K Finance and volume metrics are more relevant as opposed to TVL.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?
Yes, we are committed to updating the Arbitrum Forum thread. We have existing Dune dashboards and subgraphs which facilitate the gathering and reporting of data. Metrics such as volume, transactions, fees and unique addresses will be tracked.
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: Yes
The provided proposal serves solely as a source of information and does not forge any legal commitment or pact between Y2K Finance, Arbitrum DAO, or any other involved entities. The decision-making and distribution of ARB tokens remain at the mercy of the approval and judgement of the delegates of Arbitrum DAO. There are no guarantees or assertions from Y2K Finance or any additional parties concerning the precision, thoroughness, or appropriateness of the shared information, and Y2K Finance will not hold responsibility for any losses, harm, or negative repercussions stemming from this proposal. All entities are encouraged to perform their own comprehensive evaluations and to consult with independent legal professionals before making any determinations or pledges based on this proposal.