Cork Protocol, which has built the new DeFi primitive similar to credit default swaps for pegged crypto assets, today announces its participation in the a16z Crypto CSX Fall 2024 cohort. Backed by investors including OrangeDAO and Ideo, Cork Protocol’s participation in the 8-week program aims to speed up its early-stage go-to-market strategy.
The missing piece that will bring maturity to the emergent crypto financial system is competitive market risk pricing, whether for insurance or efficient hedging. One asset class that is sorely lacking these tools is crypto assets that track a par value (stablecoins, LSTs, LRTs, etc). These often experience ‘depegs’ or price deviations from par in secondary markets. Notable cases include USDC in March 2023 or situations in emerging technologies, such as the temporary depegs of Liquid Restaking Tokens (LRTs). These events have the potential to cause cascading liquidations across borrowing and lending protocols and propagate risk across the system as a whole.
Cork Protocol introduces Depeg Swaps to bring the power of competitive markets in risk pricing to crypto. Cork Protocol can be used as part of a long-term buy-and-hold strategy by rolling hedges, as a yield enhancement for underwriters of the hedged asset, or as part of a collateral stack for lending and borrowing. The Cork Protocol team hopes that using the platform will aid crypto users and institutions in finding temporary price deviations less frequent, shorter, and less severe. While Cork cannot prevent black swan events, it offers investors a way to price risk and insurance against both temporary and permanent depegs.
Cork can offer institutional users of liquid staking tokens, like stETH, access to competitively priced and effective market insurance for slashing and liquidity risks. Depeg Swaps are also designed for other crypto assets, including stablecoins or restaking tokens, like eETH, for users who wish to hedge more complex positions on-chain. Cork has received investment from Web3 leaders, including a16z CSX, OrangeDAO, Ideo Ventures, Outliers Fund, Unbounded Capital, Steakhouse Financial, and 20 other investors and angels from Tradfi and DeFi.
A competitive marketplace to price smart contract, slashing and liquidity risk could fundamentally improve the UX of interacting with stETH. There are many potential synergies across the ecosystem for a protocol that can help protect against one or more of these risks,” says McNut, Lido Contributor.
The market currently lacks the ability to price the risk relating to the stacked infrastructure underlying pegged assets,” says Phil Fogel, Co-Founder of Cork Protocol. “We’re excited to build a new DeFi primitive that is sorely needed in the market to help create greater stability and efficiency in DeFi. With our protocol, the market will be able to price, hedge, and trade risk in real-time.”
Across the eight weeks in New York City, Cork Protocol will benefit from tailored resources and support, including mentorship from industry leaders, exposure to the a16z network, and collaboration amongst other cohort members. Participation in the CSX Fall 2024 cohort affords Cork Protocol the chance to refine its Depeg Swaps product – the DeFi version of TradFi’s Credit Default Swaps before the mainnet launch.
In conjunction with this announcement, Cork Protocol is launching a Testnet Trading Competition starting the week of September 17th. The competition will take place on the Sepolia Testnet, allowing participants to test the protocol under simulated conditions while competing for profits and reporting any bugs found during the competition. A total of 1.75 ETH will be awarded for tasks like 0.5 ETH to the trader with the highest overall profit, 0.25 ETH for the most profitable liquidity provider, and 0.1 ETH for the best bug report.
We’re excited to invite DeFi enthusiasts, traders, and developers to participate in our Testnet Trading Competition,” adds Rob Schmitt, Co-Founder of Cork Protocol. “This competition is a fantastic opportunity for the community to engage with our platform, contribute to its development, and win some great prizes.”
Credit Default Swaps (CDS) have been pivotal in pricing risk in traditional finance and making it possible for investors to hedge against corporate credit defaults,” says Mona El Isa, founder and CEO at Avantgarde Finance. “Cork Protocol applies the CDS framework to DeFi, making it possible to price and hedge risks in DeFi. There is a big need for this as Liquid Staking Tokens and Liquid Restaking Tokens in particular grow.”
For more information about Cork Protocol and to participate in the Testnet Trading Competition, readers can visit the Cork Protocol Website and join the conversation on Discord.
What Others Are Saying About Cork:
We are thrilled to announce our backing of Cork Protocol. Their innovative approach to stabilizing DeFi through pegged asset exchanges is truly groundbreaking,” says Poseidon Ho, Founding Partner at Outliers Fund. “We believe this will have widespread applications for Liquid Staking Derivatives and Liquid Restaking Tokens assets. Proud to be a backer of such an innovative team.”
Cork Protocol are a crazy smart team with a zero-to-one vision. Cork’s ability to hedge popular pegged assets with unlimited liquidity depth will change the game for investing and farming,” says 0xlogic, Castle Capital, and DeWhales Capital.
About Cork Protocol
Cork Protocol is a decentralized finance (DeFi) platform that introduces Depeg Swaps, a new financial primitive designed to price and manage the risks associated with pegged assets, such as stablecoins and liquid (re)staking tokens. Cork Protocol aims to enhance liquidity, reduce risk, and foster safer on-chain credit markets by providing tools for both hedging and trading risk.
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