UNION’s Collateral Optimization Product (C-OP) is a DeFi derivative primitive that allows a user the ability to hedge risk. A user who purchases a C-OP gains downside protection for the covered asset.
What exactly does this mean?
If Bitcoin is $50,000 and a user wants to purchase a C-OP to protect a decrease in value from $50,000 to $40,000, they would purchase a BTC C-OP with a strike price of $50,000. If the Price of BTC was to decrease to $40,000 while the coverage was in effect, the user would exercise the C-OP and receive $10,000 from the protection pool.
For an in-depth technical overview of Union’s C-OP, please read Union’s Whitepaper, Union’s Gitbook, Union’s Github, and this Medium Article.
The below guide will walk you through how to purchase UNION’s C-OP Protection on the Ethereum Network.
1)Visit UNION’s homepage at https://www.unn.finance/.
2) Click “Launch App”.
You will be brought to the protocol’s interface at https://app.unn.finance/. In the future, you can come directly to this page in order to access UNION’s C-OP smart contracts.
3) If this is your first time visiting the interface, you will need to connect your wallet. Otherwise, please skip to step #7.
4) When you click “Connect”, you will be prompted to allow your MetaMask wallet to connect to the UNION application.
5) Select the MetaMask wallet you want to connect to the UNION application and click “Next”.
6) Click “Connect” to connect to the UNION application (smart contract interface).
Your MetaMask wallet is now connected to the UNION application. Your connected wallet will be visible on the upper right corner of the screen.
Now that your MetaMask wallet is connected to the UNION application, you can either Purchase Protection (Cover) or Supply Liquidity (Stake).
Please note, in order to interact with the protocol, you will need to have ETH in your wallet to pay gas / transaction fees. This fee is paid directly to the Ethereum network — none of it goes to Union.
You will also need USDC in your wallet to Purchase Protection or Supply Liquidity.
The below steps will show you how to Purchase Protection.
The next article in this series will show you how to add liquidity (stake) to the protocol.
7) In order to Purchase Protection, please click “Protection Buyer” or “Cover”.
UNION’s C-OP Protections are called Cover since UNION allows for a user to obtain protection against adverse events. “Protection” and “Cover” can be used interchangeable when describing the C-OP protection offerings.
You are now looking at your Cover page. This page is unique to you and your wallet. It will list all of your Covers (aka protection).
8) In order to Purchase Protection, please click “Buy Cover.”
You are now looking at the C-OP Marketplace.
There are over 20 C-OPs currently available, with more being added every month.
For this example, we will purchase a Bitcoin C-OP.
Purchasing a Bitcoin C-OP will provide us with downside protection in the event Bitcoin decreases in value during the coverage term.
Each C-OP title displays the token’s logo, name, symbol, and pool liquidity.
For this example, the Bitcoin C-OP Liquidity pool is able to provide protection for a position up to .33 BTC Tokens (Collateral). This is approximately equal to $17,000.00 (Liquidity Token).
9) To Purchase a Bitcoin C-OP, please click “Select”.
10) You are now looking at the “Buy Cover” page.
The Buy Cover page is divided into two tiles.
The tile on the left side of the screen displays the pool information. Here, we are looking at the Bitcoin C-OP Protection Pool with liquidity to provide approximately $17,000 of protection (enough to protect .33 BTC).
The tile on the right side of the screen provides the quote to purchase Protection. You will need to enter the amount of BTC tokens you want Protection for, the Term of the protection window, and the Strike price for the Protection.
11) To generate a quote, you will need to fill in the fields for “Amount”, “Term”, and “Strike”.
“Amount” is how many BTC tokens you want to protect. This can be any quantity of BTC Tokens up to the Pool’s available Capacity.
“Term” is the length of protection you want to purchase. C-OP Protection can be purchased for 1 day, 1 week, 2 weeks, 3 weeks, or 4 weeks.
“Strike” is the token price at which C-OP Protection can be claimed.
12) For this example, we will purchase a BTC C-OP to protect .25 BTC, with a Term of 2 weeks and a strike price of $45,000.
Once this C-OP is purchased, if the price of BTC falls under $45,000 during the 2 weeks the C-OP protection is in place, we are able to claim the difference in value between the price of BTC at the time of claiming and $45,000.
Please note, you will not be able to advance to the confirmation screen if your wallet does not have a USDC balance greater than the Cover Cost.
13) After entering the Amount, Term, and Strike, please click “Get Quote.”
This will generate details of the Protection that you can now purchase.
The newly generated box contains all of the relevant information for the potential protection.
“Expiration” is the date that the Protection ends. Here, the Protection is valid until December 21, 2021.
“Unit Cost” is the cost to protect 1 BTC.
“Quote Spot” is the spot price the quote is generated from.
“Current Spot” is the current spot price of BTC.
“Total Cost” is the amount the protection will cost you to purchase. Here, we are protecting .25 BTC, so the Total Cost is ¼ of the Unit Cost.
14) To Purchase this Protection, please click “Buy Cover.”
After you click “Buy Cover” you are taken to the Confirmation page.
The Confirmation page restates the Expiration, Unit Cost, and Total Cost.
15) To purchase this Protection, please click “Buy Cover.”
If this is your first time interacting with the BTC Protection Pool, you will need to grant Permission for the Pool to access your USDC.
The one-time fee associated with granting permission is paid to the Ethereum Network and not to UNION.
16) Please click “Confirm” to allow the C-OP BTC Protection Pool to interact with your wallet.
The permission process may take a few minutes. You will see a “Transaction Pending” icon while the transaction is pending.
17) Once the Permission has been approved, you will be promoted to complete the Protection Transaction.
18) Clicking on “Confirm” will engage the smart contract to Purchase the Protection.
The Gas is paid to the Ethereum Network to complete the transaction.
After you click “Confirm” you will see a “Transaction Pending” icon while the transaction is being processed.
Once the transaction has gone through, you will be redirected to your Cover Page and the new protection will be viewable under “My Covers”.
Please note, depending on network activity, this may take a few minutes to update.
You Cover Page now contains all the relevant information on your Protection.
“Active Covers” displays all of your open Protections.
“Inactive Covers” displays all of your Protections that have expired.
“Claims” displays all of your claims.
19) All UNION Protection Pools are on chain. To confirm the transaction has gone through, you can go to Etherscan.io and enter your wallet address to verify.
Under Tokens, you will now have a uUNN token in your wallet. This ERC-721 Token represents your C-OP Purchase.
The steps outlined above is the same process to purchase any other UNION C-OP.
UNION is a technology platform that combines bundled protection and a liquid secondary market with a multi-token model. DeFi participants manage their multi-layer risks across smart contracts and protocols in one scalable system. UNION decreases the entry barriers for retail users and lays the foundation for institutional investors. UNION’s full-stack DeFi protection is inclusive, composable, and brings battle-tested capital and pricing models from TradFi to the DeFi ecosystem.
Telegram ANN: https://t.me/UNNFinanceANN
1) This announcement is for informational purposes only and is not an offer to participate. Never send virtual assets to a smart contract you cannot afford to lose. This announcement does not constitute financial advice.
2) UNION is not an insurance company and UNION does not sell policies of insurance.
3) UNION is not an issuer of CDOs.
4) We are in a rapid development phase, and the screens may or may not look like these in final product. Some of the numbers shown are placeholders.