Epochs

The app has a "heartbeat". It aligns with a weekly or monthly cycle that contains a number of different phases (trade, intra-epoch, settlement & claim activation - see image below).

The Phases of the ERKO Monthly Epoch

The variable epoch-expiry in the epoch-info map holds the UNIX timestamp of the current epoch's expiry and acts as the contract's internal clock.

Here is how a monthly epoch plays out:

Phase 1: Trade

During the 72 block (~12 hours) registration-window the trader has the ability to register-trades to an interested buyer. The price of the option is determined off-chain and passed to the core contract by the trader.

Once a trade has been registered with the counterparty, the trader has 12 blocks (~2 hours) to confirm the trade by calling confirm-trade which then transfers the BTC premium to the counterparty from the vault contract. The options have a 1 week/month expiry (Fridays at 16:00 GMT) and the strike-call, strike-put, barrier-up and barrier-down are set by the trader by calling start-new-epoch.

Phase 2: Intra-epoch

During this period users queue-deposit which transfers their funds to the vault contract, creates a claim entry for their token representing their deposit, and queues their funds for activation in the next epoch. Users who have already claimed their tokens can call queue-withdrawal which transfers their tokens to the vault and creates a claim entry for the underlying funds representing the funds they are entitled to receive after the next epoch settles.

Users that have claims corresponding to settled epochs can call the claim function to receive their token or underlying funds.

Phase 3a: Settlement

Once the option has expired, the contract calculates the option's value (unit-pnl). This value is either positive (in-the-money) or zero (out-of-the-money).

• In-the-money scenario: If the option is in-the-money, the contract executes payment-requester which writes amount-requested to the counterparty-info map. The counterparty then has 144 blocks (~24 hours) to call make-payment and transfer the requested amount to the vault contract.

• Out-of-the-money scenario: If the option expires worthless, no settlement transactions are executed.

Phase 3b: Claim Activation

Intra-epoch deposits and withdrawals are kept separate from the vault's total-underlying-active and are tracked in the total-pending-deposits variable and the token balance of the vault (total-pending-withdrawals).

Independently from the value of the options, the core contract will activate-pending-deposit/withdrawal-claims and reserve the corresponding values of token and underlying for the outstanding claims.

The underlying-per-token at the end of the epoch (after settle) is stored in the epoch-info map as underlying-per-token-settled and serves as the reference rate when processing claims.

Please Note: Deposits and withdrawals send on-chain transfers immediately when requested by the user. But the claims corresponding to the intra-epoch deposits and withdrawals only become active at the end of every epoch.