Understanding DeFi's New Primitive CVI: How to Earn Returns from Market Volatility?
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Understanding DeFi's New Primitive CVI: How to Earn Returns from Market Volatility?
How to maximize gains using CVI?
Navigating Web3 tides with focused insightsAuthor: Viktor DeFi
Compiled by: TechFlow
Finally, you no longer need to worry about cryptocurrency volatility. Instead, you can now bet on this volatility to maximize returns—or even profit handsomely from others who are betting on it.
This article explains how to leverage CVI—a new DeFi primitive.
Built on Ethereum, Polygon, and Arbitrum, CVI is a decentralized cryptocurrency VIX that enables users to hedge against crypto market volatility.
In essence, CVI brings the "market fear index" into the crypto industry, allowing users to:
- Analyze cryptocurrency volatility
- Hedge their portfolios
- Earn profits as liquidity providers
CVI was developed by COTI Network in collaboration with Professor Dan Galai, co-creator of the VIX.
How Does It Work?
The platform tracks the 30-day implied volatility of Bitcoin and Ethereum, ranging from 0 to 200. It uses the Black-Scholes options pricing model to calculate the implied volatility (put/call) of cryptocurrency options prices.
The platform aggregates off-chain data and contracts from multiple providers via Chainlink nodes. Additionally, CVI leverages Deribit as one of its primary data sources for calculations.
Betting on Volatility
Volatility trading is one of the main ways to earn on CVI. The platform’s token is $CVOL, which can be minted on DEXs.
Traders can mint or redeem $CVOL approximately 20–60 minutes after price updates.
Funding fees are calculated based on the hourly CVI index. This means the higher the CVI value, the lower the funding fee percentage. These fees are paid by traders who mint volatility tokens.
Theta Vault
Launched in November 2022, Theta Vault aims to provide sustainable liquidity for CVI tokens. Here, users can deposit USDC and earn yields from swap fees, arbitrage fees, minting fees, traders’ PnL, and funding fees.
Tokenomics
$GOVI is the governance token of the CVI platform. The total supply is 32 million, with the initial supply airdropped to native COTI holders and LPs in the COTI-ETH pool on Uniswap.
Importantly, 85% of platform fees will be used to buy back $GOVI tokens from the market. Finally, these tokens will be distributed as staking rewards to CVI traders, LPs, and $GOVI stakers.
Notably, $GOVI has recently performed well among low-market-cap tokens, with no signs of slowing down—suggesting a bright future ahead for CVI.
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