The liquidity pool is a crowdsourced pool of crypto assets locked in a smart contract that facilitates trades between the assets on a decentralized exchange (DEX).

What is Hegic DAI Liquidity Pool?
DAI Liquidity Pool is a smart contract that does not require custody. You can contribute DAI stablecoins to the pool and begin earning DAI premiums. Other users or organizations will not have access to your funds.

DAI stablecoins allocated on the DAI Pool contract are used for selling ETH put options on Hegic. ETH put options buyers pay premiums for a right to swap their ETH for DAI from the pool at a fixed price during a certain period. Liquidity providers have an obligation to swap buyers’ ETH for DAI when they are exercising ETH put options contracts.

How the Hegic DAI Pool Works?
ETH put options buyers pay premiums for a right to swap their ETH for DAI at a fixed price during a certain period. Premiums in DAI are distributed between DAI Pool liquidity providers right after the buyers pay them. The amount of DAI stablecoins on the DAI Pool contract will be locked for the period that the buyer has paid for. If the buyer does not exercise the contract during this period, DAI will be unlocked for new contracts. If the buyer exercises the contract, they swap ETH for DAI that was locked for them. ETH will be automatically swapped for DAI using Uniswap pool and DAI will returned to the DAI Pool contract.

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