Impossible Finance Research Report #19 — Cruize Finance
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Context
The introduction of decentralized options vaults and structured products represent an innovative and novel approach to revolutionizing the world of cryptocurrencies and financial derivatives, and provides crypto-native investors a new opportunity of earning users sustainable and competitive yields long-term. In theory, these vaults offer individuals the ability to engage with options trading with increased ease, transparency, autonomy, and security without the need for intermediaries. However, in their current form and infancy, these structured product vaults have struggled to take off compared to other DeFi products due to its high barrier to entry, with crypto native users often moving towards other decentralized methods of generating yield.
The main competitive advantage of decentralized option vaults (DOVs), lies in its ease of use and simplicity. Options strategies were only available to established investors and institutions through OTC trading, or by self-execution on various option exchanges such as Deribit itself. However, the barrier to entry for the basic crypto-native user is way too high, and DOVs are here to change this. The introduction of DOVs allows investors to stake their assets into vaults, which automatically deploys assets into various options strategies based on risk appetite and desired yields.
To fully understand why DOVs and structured products are essential to the growth of DeFi, it is crucial to realize the key benefits DOVs are able to bring to the existing DeFi sector and industry. By paying option premiums, DOVs successfully monetize the high volatility of the underlying asset and inject this yield into DeFi. Due to the fact that the basic yield is derived from a sizable external options market, it also addresses the issue of declining returns caused by growing LP pools. The true base yield is the last piece needed for Defi to be scalable and sustainable over the long run, a shift away from the ponzinomics of token manufacture and distribution (layer, rinse, repeat) and in the direction of actual value accumulation from underlying market structures and trading volatility.
Project Overview
Introducing Cruize Finance, a protocol that provides volatility-protected yield opportunities for its users. Through the use of vaults, users are able to stake capital and assets in order to generate safer yields, leveraging Cruize’s various option strategies in pre-packaged instruments and structured products.
The use of structured products are meant to lower risk and offer predictable and stable profits for users on Cruize’s platform, despite the erratic swings common within the cryptocurrency market, thus allowing a risk-return balance that is not only tailored to each investor, but also optimized. With this in mind, Cruize’s structured products can be thought of as a safe harbor for capital within volatile markets, by combining different elements common in traditional finance such as derivatives and bonds. Breaking down Cruize’s structured products, the essential components are the underlying assets and derivatives within them, with underlying assets typically in the form of stablecoins like $USDC and $DAI and assets such as wETH and wBTC, whilst the derivatives are financial contracts tied to the performance of these underlying assets.
In order to provide volatility protected yield opportunities, structured products include a strike price, which can be thought of as a predetermined price at which the underlying asset can be bought or sold within a specific time frame, thus allowing and providing a safety net against extreme market movements and volatility. In addition to that, Cruize’s platform is able to further increase yield for users through the use of its “auto-rollover” feature. In essence, Cruize’s auto-rollover feature automatically reinvests returns from matured products into new ones, thus compounding gains for its users.
Traditional methods of generating yield in crypto have a variety of associated capital risks, with major risks in the form of Impermanent Losses from supplying liquidity to LP pools, Liquidation risks through leverage farms and products, and Directional Exposure from selling options and losses through trend reversals. By leveraging structured products, Cruize Protocol provides a unique investment model that provides users with the opportunity to maximize yield potential, whilst minimizing risk, through the mixture of bonds and derivatives.
Project Highlights
- Partners include: Ramses Exchange (Co-Branded Vaults), Unilend (Lending/Borrowing Liquidity for $CRUIZE), Blocmates, ANDAO, Biconomy (Gasless User Experience), Gamma (Active Concentrated Liquidity Management), Layer Zero (Omnichain Trading Experience)
- Expansion into other ecosystems such as Optimism, Polygon, Binance Smart Chain, and Avalanche in the future
Quick Metrics
- TTS Allocated to Impossible Launchpad: 4,500,000 CRUIZE
- Public Sale Token Price: 1 CRUIZE = US$0.11 BUSD
- Total Token Supply (TTS): 100,000,000 CRUIZE
Investment Thesis
Novel Yield Generation and Effective Risk Management through Cruize Finance’s Twin Peak Vaults:
With Cruize Finance being able to provide sustainable and competitive yields with capped downside risk, it is crucial to understand the infrastructure surrounding Cruize’s Twin Peak Vaults. When users deposit their assets into the Twin Peak Vaults (whether wETH, wBTC, or stables), the protocol automatically auctions the liquidity within these vaults to market makers at the beginning of every epoch, and allows market makers with the highest bid access to this liquidity.
Market makers pay a fixed interest rate for receiving the capital and liquidity from these vaults, and the interest rate paid can be split into two areas. A portion of the interest rate generated is set aside as the base rate provided to vault depositors, whilst the rest of the paid interest rate is used to purchase weekly-at-the-money options. There are two types of options bought:
- Up-and-out call option with the spot price as the strike and the barrier representing the upper barrier of the vault range
- Down-and-out put option with the spot price as the strike and the barrier representing the lower barrier of the vault range.
This in essence, allows one of the two options to capture the upside and payoff from the price fluctuations of the underlying asset, up until the upper or lower barriers respectively. Through utilizing Cruize Finance’s Twin Peak Vaults, users are thus able to gain access to higher returns, without being exposed to capital risks and price fluctuations of the underlying asset. If the price of the underlying asset falls outside of both barriers, users still earn in the form of lending, as capital and liquidity within the vaults still earn interest from being lent out to market makers. This allows users on Cruize’s platform, to not only generate a positive return on capital and investments in both bullish or bearish markets as long as the underlying asset price doesn’t breach through the predetermined barrier.
In addition to that, the strategies from Cruize’s Twin Peak Vaults have already been tested with historical price data from the past year (January 1st, 2022 - January 1st, 2023) with ETH being the underlying asset, and have showcased phenomenal results compared to other decentralized options vault (DOV) competitors. In the timeframe listed above, depositors in Cruize Finance’s Twin Peak Vaults would have generated a 7.05% yearly return. However, when comparing to competitors DOV products such as Ribbon Finance’s and StakeDAO’s ETH covered call, produced returns of about -0.2% and -4% respectively. Not only does Cruize’s Twin Peak Vaults produce higher returns (based on historical price data of ETH), but principal is also protected compared to competitors. Principal within Ribbon Finance and StakeDAO’s ETH covered call are exposed to limitless downside and losses during extreme bull and bear cases, making them unfeasible as a sustainable form of revenue and income. Cruize Finance aims to cover this gap within the DOV market, by ensuring users are not only able to gain higher sustainable returns, but also mitigating capital risk for its users.
With principal-protected structured products, the Twin Peaks vault offers investors a year-round investing option. Investment in the vault consistently beats both risky alternatives, such as selling options, as well as safer alternatives, such as lending, for investors wishing to profit safely from the market's volatility without taking any capital risks.
Competitive Landscape for Decentralized Options Vaults (DOV)
Cruize Finance stands out in the DOV landscape with its unique approach to risk management and yield generation. It differentiates itself from competitors like Ribbon Finance and Cega Finance through its innovative strategies and product offerings.
Ribbon Finance, a decentralized options vaults (DOVs) protocol, offers high APY by selling vanilla options. However, this strategy exposes the entire capital deposited by users to risk. In some instances, Ribbon Finance has experienced a loss of over 50% of the capital deposited in their vaults, resulting in a negative APY. In contrast, Cruize trades structured products with only buy-side exposure, minimizing loss exposure to the cost of the options. These options are financed using the base yield generated on assets, making the arrangement essentially risk-free. When looking at comparables for valuation, Ribbon Finance currently has a circulating market capitalization of $131 million USD, with a fully diluted valuation of $180 million USD. Cruize Finance will launch at an FDV of $11.2 million.
Cega Finance, on the other hand, claims to offer capital-protected gains by trading fixed coupon notes (FCNs). However, this strategy actually carries capital risk. Additionally, Cega only accepts USDC deposits, has lock-in periods of 27 days, with users reporting a meager 0.1% APY on their USDC deposits. Cruize outperforms by offering flexible structures for popular volatile currencies such as ETH and WBTC, as well as stablecoins like USDC.
In summary, Cruize Finance's unique approach to risk management and yield generation sets it apart in the competitive DOV landscape.
Future Roadmap
Cruize Finance has successfully completed the initial phases of its roadmap, including the revamping of structured products research, system design, contract architecture, and the mainnet launch of the Genesis Vault. As it moves forward, the platform has a robust plan for future development and expansion.In the upcoming phase, set for Q3 2023, Cruize Finance will focus on enhancing security measures, conducting bug bounties, and undergoing audits. This phase will also see the platform working on integrations and business development efforts to expand the capabilities of its vaults.
Moving into Q4 2023, Cruize plans to double down on its institutional onboarding. This phase will also see the implementation of a governance framework and expansion across different blockchain networks, broadening the reach and accessibility of Cruize Finance.
Finally, in Q1 2024, Cruize Finance plans to introduce a public API for permissionless vault integration, launch a mobile app, and integrate with wallets for native support. The team will also work on hedging against additional risks such as impermanent loss and conduct research for new product development. This future roadmap underscores Cruize Finance's commitment to continuous innovation, user-centric development, and expansion in the DeFi space.
Team
Cruize Finance is powered by a team of experienced entrepreneurs and developers, with the technical expertise to be able to build out and deliver the core roadmap items within Cruize’s future. The team has a diverse mix of skill sets and expertise, from quantitative research, development, marketing, and design. Overall, the Cruize Finance Team is a group of talented individuals looking to make significant strides within the DOV space, and with a shared vision for Cruize to be one of the thought leaders within this sector. The combination of experience and expertise, technical knowledge, and commitment ensures that Cruize Finance is steered in the right direction, and ensures the long-term success of the project itself.
Samarth Zalte (Cofounder & Product Lead)
Samarth has over two years of experience in the realms of design and development. He has had the privilege of working with some of the top product and service companies in India, including Wednesday Solutions and Saastitute, where he honed his technical skills and gained invaluable industry insights. In his roles, Samarth has demonstrated a strong ability to combine creative design thinking with robust development strategies, delivering solutions that are not only aesthetically pleasing but also functionally effective. His work has spanned various projects across wide ranging domains such as logistics, ecommerce, fintech as well as SaaS, each time showcasing his adaptability and commitment to quality.
In addition to his professional roles, Samarth has also ventured into the entrepreneurial world as the founder of Sleefax, a startup that was recognized among the top 10% of YCombinator’s applying cohorts. This experience has given him a unique perspective on business strategy and the challenges of building a company from the ground up. Samarth's blend of technical expertise, creative design skills, and entrepreneurial experience makes him a versatile professional capable of driving innovation and growth. As he continues to advance in his career, Samarth remains committed to leveraging technology to create impactful solutions.
Prithviraj Murthy (Cofounder and Tech Lead)
Prithviraj is a seasoned technology leader with a diverse portfolio of software development experience that spans across web technologies, blockchain, AR/VR, and AI. As a tech lead, he has demonstrated exceptional technical acumen and leadership skills, driving teams to deliver innovative solutions and achieve ambitious goals. His professional journey includes a significant stint at Grofers, one of India's largest tech companies, where he contributed to the development of robust and scalable order management systems. His work at Grofers not only honed his technical skills but also gave him a deep understanding of the dynamics of working in a fast-paced, high-growth tech environment.
Prithvi's talent and dedication have also been recognized on competitive platforms. He emerged victorious at Google's Build for Digital India, India’s biggest hackathon, a testament to his problem-solving abilities. In addition to his corporate and competitive achievements, Prithvi has also ventured into the entrepreneurial world as a startup founder. This experience has equipped him with a unique perspective on business strategy, product development, and the challenges of building a company from scratch.
With his extensive technical expertise, leadership skills, and entrepreneurial experience, Prithvi continues to push the boundaries of what's possible in the tech world, driving innovation and growth in every project he undertakes.
Cruize Finance Token Metrics
- Total Token Supply (TTS): 100,000,000 CRUIZE
- Public Sale Hard Cap for Impossible: US$500,000 (split into multiple pools)*
- Token Vesting: 25% of tokens unlocked at TGE, 25% vested every month for the remaining 3 months after TGE
- Buy-back Protection Program: Cruize Finance has pledged to Buy-back CRUIZE tokens in the event token price falls beyond a certain threshold. More details to be released soon.
- Day 1 Circulating Market Cap: 5,750,000 CRUIZE
- Listing Price: USD $0.11
Tokenomics:
Risk Evaluation
Cruize Finance’s main risk would be the credit risk associated with lending out to market makers, as market makers can potentially default in extreme events, leading to loss of both principal and yield invested into the vaults provided by Cruize. However, Cruize Finance is able to minimize and mitigate this risk by ensuring that market makers onboarded onto Cruize’s platform are not only accredited and well-known market makers, but have a strong history of credit worthiness. In addition to that, deposit and smart contract risks have to be brought up for users, with Cruize having new experimental smart contracts, the risk of loss of deposits has to be taken into account. However, Cruize Finance has already undergone one audit, and will aim to push out another audit in the coming weeks, ensuring the security and reliability of its smart contracts is something users will not have to worry about.
About Cruize Finance
Introducing Cruize Finance, a protocol that provides volatility-protected yield opportunities for its users. Through the use of vaults, users are able to stake capital and assets in order to generate safer yields, leveraging Cruize’s various option strategies in pre-packaged instruments and structured products.
Website | Twitter | Discord | Medium
About Impossible Finance
Impossible Finance is a multi-chain incubator, launchpad, and swap platform led by Ex-Binance & DeFi veterans. It offers a robust product-first ecosystem that supports top-tier blockchain projects to targeted user audiences. With extensive support from key leaders in the crypto industry, Impossible Finance simplifies DeFi for users to enjoy fairer investing, cheaper trading and better yields.
Website | Whitepaper | Medium | Twitter | Telegram
Impossible Tokens
IDIA token is the core governance and access token for allocation into our launchpad IDO sales.
IF token is the core governance and fee accrual for the swap and other non-launchpad products within the Impossible family.
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Terms & Conditions:
- Notes: DISCLAIMERS, TERMS, and RISKS
- Risk Warning: Trading and/or generally investing in any cryptocurrency involve significant risks and can result in the complete loss of your capital. You should not invest more than you can afford to lose and you should ensure that you fully understand the risks involved. Before investing, please consider your level of experience, objectives, and risk tolerance, and seek independent financial and legal advice if necessary. It is your responsibility to ascertain whether you are permitted to use the services of Impossible Finance based on the legal and regulatory requirements of your country of residence and/or applicable jurisdiction(s)
