General

For general questions frequently asked to or about Hermetica.

Q. What inspired Hermetica's products?

A. Our approach has a number of unique angles (strictly no tail risk, trend following, fully non-custodial, BTC focus, tokenization, etc.) that have not been done before in other ecosystems.

That being said, our main inspirations were products available on the Solana and Ethereum ecosystems. While those products made the grave error of exposing their depositors to the Turkey problem (tail risk) but their overall approach and early success gave us a number of good ideas to work with.

Q. Where can I see historical performance?

A. You can review historical performance from the strategy's analytic's page. You can also review historical backtest data for specific tokens in the respective sections of the docs.

Q. What asset are yields paid in?

A. Yields are paid in the same underlying deposit asset. For example, yield for the USDh strategies are paid in USDh.

Q. Are your strategies backtested?

A. Yes, we arrive on the final structure after going through a litany of strategies.

The backtest results of the chosen strategy are shared publicly and speak for themselves in our opinion (obviously not a guarantee of future returns).

Q. Why automation via smart contracts

A. A certain level of financial acumen is required to execute the strategies successfully and therefore, in the traditional financial system, they have mainly been employed by financial institutions and sophisticated high net worth individuals. We believe that by automating the execution using Clarity smart contracts, we can make these strategies available to a much wider audience. This is a crucial step towards a truly open and democratized financial system - a financial system that makes sophisticated options strategies accessible to anyone with a Bitcoin/Stacks wallet, all without needing to give up custody of assets.

Q. Why Stacks?

A. Stacks is the first smart contracting layer for Bitcoin and by extension the natural home of Bitcoin DeFi.

The Clarity smart contracting language has an optimal mix of expressibility and built-in security that streamlines the development process of non-custodial, trust-minimized applications like ours.

Q. What are structured products?

A. Structured products are pre-packaged investments instruments that give easy access to derivatives strategies to achieve specific investment goals, like generating yield on Bitcoin.

Q. Is Hermetica multichain?

A. At the moment, Hermetica only operates on the Stacks blockchain. USDh will be released on Bitcoin L1 via Runes and we're actively monitoring other L2s and will opportunistically launch our products on chains that gain traction.

Q. Is Hermetica audited?

A. Yes, Hermetica has been formally audited by Thesis Defense. All issues reported in the audit report have been resolved. Future audits are planned and we're committed to security in all our engineering processes.

Despite being audited, we still advise our users to exercise caution and only risk funds they can afford to lose.

Q. Is Hermetica always going to use the same oracle for the contracts?

A. Our current contract uses Pyth for our oracle. We may choose another oracle for future contracts. The price validation may change slightly, but the principle for our oracles of choice remain the same: A trusted decentralized oracle provides the attestation / signature for a price data payload which is then verified on-chain.

Q. What is the risk of faulty or malicious price data provided by the oracle?

A. The price data is only used for profit calculations, it can't be used to transfer funds. The worst scenario would be an epoch with 0 profit. In that instance, we should remediate with the counterparty who sold us the options contracts off-chain.

Q. What happens in the counterparty is delinquent?

A. If the counterparty is delinquent the epoch would be transitioned manually. If the counterparty would like to remedy, they could use deposit-funds to make the correct payment.

Q. Who is Hermetica's counterparty

A. We use market makers as our counterparty.

Q. Is there counter-party risk by using market makers for the options?

A. Our strategies have risk built in. The stSTXearn strategy, for example, only allows for 2% per week to be deployed. If the market maker / counterparty is insolvent or nefarious the maximum depositors are able to lose is 2%. Hermetica's contracts are also designed so that any funds are unaffected in the event of a compromise.

Q. Is the epoch time frame deliberate? Will Hermetica allow for changes in the epoch timeframe depending on volume, user demand, etc.?

A. While the epoch timeframe can be changed from a purely technological perspective, they are chosen deliberately. In fact, the epoch timeframe is integral to make each strategy work. The epochs for each strategy are selected for their significantly higher backtested APY.

Q. Does Hermetica have plans to develop liquidity for its Liquid Yield Tokens?

A. Yes, we are working on creating liquidity for our tokens in the near future through AMM and partnerships within Bitcoin DeFi. We will share more details soon.