Moon Module

Purpose of the Moon Module

The Moon Module operates by collecting safety fees from users when they secure loans on the Blendy platform. These fees are directed into a Collateral Vault, 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

Blendy buys put options at a discounted strike price relative to the Time-Weighted Average Price (TWAP) of the underlying asset. These put options are underwritten on-chain, with a Collateral Vault serving as counterparty and collateral to the put options in the event of an exercision.

The management of put options is handled internally, ensuring users and Collateral Vault depositors 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.