Understanding Y2k Finance's Product Architecture and Token Model in One Article
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Understanding Y2k Finance's Product Architecture and Token Model in One Article
Y2k Finance is a product that helps people speculate on pegged assets, built on Arbitrum and incubated by NeworderDAO.
Navigating Web3 tides with focused insightsAuthor: M
Compiled by: TechFlow
Stablecoins both generate liquidity in DeFi and serve as a source of chaos within it. So, is there a way to help control and prevent black swan events like the UST depeg?
Y2k Finance offers such a solution. This article will detail its mechanisms and everything you need to know—including potential airdrops.
Y2k Finance is a product designed for speculation on pegged assets, built on Arbitrum and incubated by NeworderDAO.
The protocol introduces three main products:
- Earthquake: Insurance vaults
- Wildfire: Secondary market
- Tsunami: CDO — Lending market
Let’s examine each one in turn.
Earthquake
It is Y2K’s first flagship structured product, where you can:
1. Hedge your stable asset risk by purchasing peg insurance (if you believe your stablecoin will depeg).
2. Deposit collateral and earn yield by betting that your stable asset will remain pegged.
Let’s illustrate this with examples.
Case 1: Your asset remains pegged
User A purchases insurance via Earthquake (e.g., for $UST). They deposit premiums into a pool backed by User B’s collateral (e.g., $ETH).
If $UST does not depeg => A pays premiums to B, and B can withdraw their $ETH.
Case 2: Your asset depegs
User A’s $UST drops from $1 to $0.97 during the insurance period.
$UST depreciation => A still pays premiums to B, but a significant portion of A’s loss is compensated by B’s collateral—in this case, $ETH.
Each vault has a (high/medium/low) risk profile with the following attributes:
- A specific pegged asset
- A defined monthly time frame
- A strike price that triggers potential liquidation and payout
A 0.25% fee is charged on premium and collateral vault deposits, and a 5% fee on collateral yield. Users can enter low-risk vaults once per month and high-risk vaults weekly.
Throughout the insurance period, sellers lock their collateral until expiry. This is where Wildfire comes into play.
Wildfire
A secondary market enabling User B to trade their positions during the term. This allows greater participation without locking assets on the platform for a full month and enables User B to partially exit their position.
Tsunami (CDO)
Before diving into Tsunami, let’s understand the concept of a CDO.
Collateralized Debt Obligation
In short, a CDO bundles various assets—such as lease contracts, auto loans, and bonds—and structures them into tranches rated by credit quality (e.g., AAA, BBB).
In Tsunami, liquidity providers supply pegged loan assets (FRAX, USDC, DAI...).
After finalizing agreements with borrowers, CDO NFT tokens are minted. When borrowers are liquidated, CDO providers receive interest payments and portions of the seized collateral.
Similar to GMX’s $GLP model.
$GLP acts as a leveraged liquidity pool, while $CDO is used for lending.
Interestingly, when users are liquidated, they retain part of their collateral, which incentivizes borrowing on Y2K over other platforms.
Future outlook for $Y2K
Here are some announced features of $Y2K:
- Fee revenue (70% to veY2K; 30% to treasury)
- 5% of yield from risky collateral
- 0.25% fee on insurance premiums and collateral deposits
veY2K (similar to other veToken models):
- Emission distribution
- Yield boosting
- Marketplace for veY2K
Bribes and protocol insurance:
- Selling rights/insurance to projects seeking to assure users about their stablecoin’s stability.
How to get $Y2K tokens?
Besides participating in the IFO on Y2K’s official website, those who provide liquidity as collateral or insurance will be allocated locked $Y2K tokens.
Additionally, you can join Discord and earn the Doomlist role.
While not guaranteed, holding the Doomlist role may qualify you for a potential $2,000 airdrop (as hinted in recent posts). Their Discord hosts quizzes, treasure hunts, contests, and more to distribute Doomlist roles.
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