Announcing UpDown👆👇: A decentralized price prediction mechanism.
UpDown👆👇 is a non-custodial decentralized price prediction protocol allowing shorts and leveraged price exposure without over collateralization. UpDown👆👇 creates a layer of optionality on any token and offers a multiplier of the price shift.
- UpDown👆👇 is an extremely simple protocol. Deposit a token. Receive two tokens: Up and Down.
- Sell your Downs if you think the underlying price will go up.
- Sell your Ups if you think the underlying price will go down.
- You may buy into a pool at any time and cash out at the next Epoch.
- This differs dramatically from other protocols which have fixed start and end dates.
- Tokens are standard ERC20 and deposited funds are never exposed to a governance risk.
At its core UpDown👆👇 is like a Uniswap for price predictions. It lets depositors use any token to take positions on the price change of any other token.
In other words: UpDown👆👇 allows traders to take a fixed-time long or short position on an asset’s price movement in a different collateral currency (without having to hold that asset).
For example, I could take a $100 DAI position on the downward swing of ETH/USD and if ETH went down 10% I could withdraw $120 DAI. Instead, I could take a $100 DAI position on the upward movement of $MEME (without owning any $MEME token) and withdraw $120 DAI if the price of $MEME has increased 10%.
If you believe the price will go up, you should sell Downs and buy Ups. If you think the price will go down you should sell ups and buy downs. Liquidity on Balancer will be incentivized for the pools. You do not need to own the asset to profit from a correct prediction.
You can read about the full mechanism here: https://medium.com/@defilucy/cd0e512e1a72?source=friends_link&sk=ecfc94935706dcad2289f71e42b544d0
UpDown👆👇 is launching with 2 pools.
- 1 week DAI pool tracking YFI/ETH price using the AAVE price feed
- 1hr UNI pool tracking PICKLE/ETH using the Uniswap spot price
The first is a reasonable pool that allows $YFI price exposure without holding $YFI or removing it from your vaults. The pool uses the AAVE price oracle which is relatively safe.
The other is a fully degenerate, completely unsafe pool using the Uniswap swap price as an oracle (this is very unsafe and manipulable). The underlying asset is the PICKLE/ETH pair and the deposit asset is UNI. You can earn UNI on the shift in price of the PICKLE/ETH pair using 1hr epochs (280 blocks). This pool is purely for experimentation.
There will be many more to follow. An in-progress (safe) Uniswap price oracle will allow any token pair traded on Uniswap to act as the underlying asset.
Liquidity and Governance
Funds in the pool are never exposed to a governance risk and are purely controlled by the users of the protocol and the protocol itself. Governance cannot access the funds nor stop the contract.
UpDown relies on Balancer for liquidity and the protocol will incentivize early liquidity providers of Up/Down pairs.
The governance token name is to be decided and the governing contract is the Queen. This governance is only used to manage protocol fees and is not able to access collateral funds.
UpDown👆👇 is on a path to decentralization. Lucerne will have executive control until such a time as there is an exit to the community. That said, UpDown👆👇 uses a Timelock contract with *veto* power from the community. Any commands must be queued in the Timelock for a minimum of two days and governance token holders may vote to cancel the command. This is the right balance for the early days of the protocol: executive, fast control but community safety nets.
10 basis points (0.1%) are charged at pool exit and are sent to the Timelock contract.
The Queen contract may not withdraw funds from the pools.
After the first distribution of CHK, the Queen contract will transition from a time locked contract over to a voting-based system owned by the governance tokens.
Source code available here: https://github.com/updown-defi/updown-core
What is UpDown👆👇?
UpDown👆👇 rewards accurate price prediction in either direction of movement. It is similar to Options in CeFi, or a collection of ETFs (either with multipliers or inverted). However, it is new and created specifically for DeFi purposes.
Why would I use UpDown👆👇?
UpDown👆👇 is useful in at least two ways:
- to multiply your exposure to an asset (similar to using leverage) without fees and without purchasing the asset.
- To programmatically hedge risk of an asset without having to purchase it.
UpDown👆👇 lets you choose your risk/reward exposure without having to resort to complex trades, borrowing or having to worry about constantly renewing options.
What is UpDown👆👇 similar to?
UpDown is similar to either a derivative ETF (2x or inverse) or an Option in tradFi. In the defi space you can think of UpDown as a simpler mechanism than something like Hegic or Opyn.
Why is UpDown👆👇 a pseudo anonymous project?
Because we believe in true decentralization. Who we are shouldn’t matter when code is law and your funds are never at governance risk. We aren’t trying to control the outcome or steal people’s money- we built UpDown👆👇 to prove that decentralized tech CAN work with good intent and we don’t want the credit. Creating a decentralized web started from a visionary place built on the principle that access to technology & information is for everyone and we’re committed to making sure it gets there.