COTI, an enterprise-grade fintech platform allowing organizations to create their own payment solutions and digitized currencies, built the Crypto Volatility Index (CVI) to bring the concept behind the Cboe Volatility Index (VIX) to the crypto space. CVI uses the Black-Scholes option pricing model to compute the implied volatility of Bitcoin and Ethereum option prices, then analyzes how markets anticipate future volatility.
In order to save operational costs and development time, COTI integrated Chainlink Keepers’ decentralized smart contract automation service to help rebase CVI’s volatility tokens. Recently, CVI added to its basket of volatility products with the launch of Armadillo, its new impermanent loss protection platform, which also integrated Chainlink Keepers to help securely and cost-efficiently automate payouts to liquidity providers (LPs) for their incurred impermanent loss (IL).
Yoni Neeman, Chief Innovation Officer at COTI, told Chainlink Today that Armadillo’s solution offers first-of-its-kind cross-chain IL protection that is fully decoupled from the corresponding liquidity.
“Armadillo doesn’t rely on the token prices on a DEX (decentralized exchange), but instead relies on Chainlink Price Feeds,” Neeman said. “This allows users to take cross-chain protection. For example: you can take a protection on the Polygon platform to protect your liquidity which is on Ethereum mainnet.”
Neeman said integrating Chainlink Keepers to automate impermanent loss protection payouts increases both the security and decentralization of Armadillo’s platform, the first independent platform built on the CVI ecosystem.
“As we use Chainlink Keepers for CVI, it made perfect sense to do the same with Armadillo,” he said. “The key reason we’ve done so is the unmatched reliability of Chainlink. As the security of users’ funds is our number one priority, this is a very important point for us.”
Neeman sees the “shared vision” of CVI’s community as a key driver of the platform’s innovation.
“I think the community really sees that we’re building a very unique solution in DeFi,” he said. “As the VIX’s ecosystem is so huge in financial markets, bringing it to DeFi will be absolutely massive.”