Moon Module

Purpose of the Moon Module

The Moon Module operates by collecting safety fees from users when they secure loans on the BlonkFi platform. These fees are directed into a hedging pool, which is subsequently used to purchase put options. By utilizing put options, the Moon Module creates a safety net that helps mitigate the risks associated with the volatility of collateral assets. This ensures a more secure borrowing environment for users who leverage their memecoins to borrow stablecoins.

What are Put Options?

Put Options are financial instruments granting the holder the right, but not the obligation, to sell the underlying asset at a predetermined price, thereby offering protection against significant price drops.

Option Purchase and Utilization

BlonkFi buys Put Options at a discounted price relative to the Time-Weighted Average Price (TWAP) of the underlying asset. These options are transacted peer-to-peer (P2P) between BlonkFi and the respective foundations, thereby reducing the influence of third-party hedging. In return for premiums on the put options, the foundations provide a discount on the strike price, ensuring the hedging process remains economically viable.

Why does BlonkFI transact with the respective Foundations in a P2P manner?

If BlonkFi were to purchase put options from other third-party traders and companies, there is a risk that those parties might try to manipulate or influence the price of the corresponding token to benefit their hedging activities.

However, BlonkFi avoids price manipulation by purchasing put options directly from the foundations that issued the tokens used as collateral.

The management of put options is handled internally, ensuring users are not burdened with these complexities. The back-end system efficiently manages these interactions to keep the platform straightforward and user-friendly. Users will not have to deal with put options directly.