What Is Y2K(Y2K)? Complete Guide & Review About Y2K

What Is Y2K (Y2K)?

Y2K Finance is a suite of structured products designed for exotic peg derivatives, that will allow market participants the ability to robustly hedge or speculate on the risk of a particular pegged asset (or basket of pegged assets), deviating from their ‘fair implied market value’.

Earthquake

Earthquake vaults redefine a core traditional Financial product, catastrophe bonds (CAT), while applying the primitive to a native DeFi setting. A CAT bond is an instrument that pays the issuer when a predefined disaster risk is realized, such as a hurricane or an earthquake. Earthquake uses the CAT bond concept but applies it to a de-peg event for stable coins, liquid wrappers and other derivative products in DeFi.

Users can hedge against these assets de-pegging by depositing ETH collateral into the Hedge vault and receiving y2ktokens (Vault Tokens) in return.

Initially, users can hedge against FRAX, USDC,USDT, MIM, and DAI de-pegging with weekly and monthly time periods. More assets will be supported in the future.

Mechanics

Types of Vaults

Positions in Earthquake are defined as an ETH deposit in one of two types of vaults:

• Hedge vaults
• Risk vaults

A user can ‘purchase’ insurance on a de-peg event on any of supported assets by depositing ETH to the corresponding Hedge vault. The deposit would mint an ERC-1155 Y2K token representing their position in the vault.

Conversely, users can sell insurance by depositing ETH in the Risk vault. These Users also mint an ERC-1155 Y2K token representing their position in the vault.

Deposit Period

Users can deposit into Y2K vaults during the deposit period of the epoch. After the deposit, funds are locked for the duration of the epoch. The deposit period spans over the first 2 days of the Weekly epochs, and the first 7 days of the Monthly epochs. Note that depeg protection is only initiated after the deposit period ends. If a depeg event happens during the deposit period the vault will not strike.

Risk Deposit

Users who are seeking to get exposure to the depeg risk market, would deposit in the Risk vaults, acting as an underwriter of depeg insurance. Depositors collect a pro-rata share of the premiums from the Hedge vault deposits, while creating a market for depeg protection for the Hedge vault.

Upon depositing into the Risk vault an ERC-1155 token will be issued as a semi-fungible receipt of the deposit. The vault token will be tradable upon Wildfire launch.

Methodology

The methodology presented is for stablecoins pegged to $1. In order to determine the strike prices, they analyzed a variety of datasets, each spanning over the past few years. Using the datasets for the stablecoin insurance vaults they are implementing, we calculated a variety of metrics to determine the appropriate strike prices and maturities for the low, medium, and high risk payouts.

Hedge Pricing

In this section, they include the effect of trading fees on risk-neutral pricing, which we will denote with the variable.

Y2K

$Y2K token is the utility token of the Y2K ecosystem, shaping the direction of 2 flagship products: Earthquake and Wildfire.

Following the IFO, $Y2K can be locked for vlY2K which will exhibit the following functions:

• Governance
• Protocol revenue sharing (30% of fees)
• Direction of emissions

At launch, $Y2K will be issued as a reward to vault depositors, but will be non-transferable until Bond initiation and the release of vlY2K. The approximate timeline for transferability is early December.

Vault Tokens

The Y2K Vault tokens are ERC1155, representing a pro-rata share of vault ownership by the depositor. Y2K vault tokens are differentiated by the following identifiers:

Asset: Token under consideration Type: Hedge or Risk Epoch: Time period of the vault Strike: How far from peg the asset price needs to deviate in order to trigger a payout to the Hedge vault depositors.

Roadmap

The protocol will launch with support for five stablecoin markets, USDC, USDT, FRAX, MIM, and DAI. Shortly after launch, the Y2K team will extend use-cases and functionality out to the following niches:

• Wildfire
• Tsunami
• Like assets: stETH, wBTC
• Exotic stablecoins: NEAR (USN), Arbitrum (VST), etc.
• Autocompounding y2k tokens
• Peg arbitrage vaults
• Options hedging
• LP y2kTOKENS (i.e. y2k4POOL destabilization tokens)