The problem HedgeFi solves

Introducing our innovative solution for risk management in the Decentralized Finance (DeFi) space - our peer-to-peer (P2P) hedging protocol inspired by collateralized debt obligations (CDO).

In the DeFi world, traditional risk management methods like hedging, risk transfer, and risk sharing are popular options. However, they often come with external dependencies, subjective assessments, community voting, and capital inefficiencies due to over-hedging. This is where our P2P hedging protocol comes in.

Our protocol enables risk management without the need for external dependencies or centralized intermediaries. It doesn't require any subjective assessments, community voting, or external data providers (oracles). It also solves the problem of over-hedging, which can lead to capital inefficiencies.

Our protocol is inspired by P2P insurance and CDO, and we have designed an economic model that facilitates risk management between two parties. The hedger and the funder are the two parties involved in the transaction, where the hedger is looking to transfer the risk to the funder for a premium.

We have formalized the protocol, assessed its efficiency and key properties, and even created a reference implementation. Our P2P hedging protocol is a groundbreaking solution for the DeFi industry, and we are excited to offer it as an option for managing risk in a decentralized manner.

Challenges we ran into

As with any innovative project, there are several challenges that we might face while developing and implementing our P2P hedging protocol.

Firstly, as the DeFi industry is still evolving, there is a lack of regulatory clarity in some jurisdictions. This can make it difficult to ensure compliance with relevant laws and regulations. We will need to work with legal experts to navigate this issue and ensure that our protocol is compliant with relevant regulations.

Secondly, the DeFi space is constantly evolving, with new projects and solutions being developed at a rapid pace. This means that we will need to stay up-to-date with the latest trends and developments in the industry and ensure that our protocol remains relevant and competitive.

Thirdly, as with any decentralized solution, there is a risk of smart contract vulnerabilities and hacks. We will need to ensure that our smart contracts are secure and undergo rigorous testing to identify and address any potential vulnerabilities.

Finally, the success of our P2P hedging protocol will depend on adoption and liquidity in the market. We will need to work with market makers and liquidity providers to ensure that our protocol has sufficient liquidity to attract users and provide a viable solution for risk management in the DeFi space.

Overall, while there are certainly challenges to overcome, we believe that our P2P hedging protocol has the potential to be a game-changer in the DeFi industry and we are committed to addressing any challenges that arise during its development and implementation.

Side Note: Testnest depolyments of various different protocols were not very easy to find and thus we had to search through a lot of other protocols and even make our own smart hard coded smart contracts in some places.