Mining

Hedge settlement or validating process.

Settlement Overview

The settlement process involves triggering by an external caller to the smart contract and does not occur automatically upon trade expiry or when traders agree to initiate a Zap. Speed is crucial; trades should be settled as soon as possible or immediately upon the expiration of the rules binding the parties.

To facilitate swift settlement, the protocol incentivizes certain participants, called miners, who are XEON token stakers willing to earn passive income by settling trades upon expiry.

Key Criteria for Participation as a Miner:

1. Staking Requirements:

   • A wallet must stake XEON tokens.

   • Staked tokens are then assigned to a Mining Pool.

2. Mining Rights:

   • The proportion of staked tokens in the Mining Pool determines the mining rights available to a wallet.

   • Wallets with more staked tokens will have the ability to mine more trades, while those with fewer tokens will mine a smaller number of trades.

   • The exact formula for calculating mining rights is under development.

Settlement Process Overview:

Settlement involves calculating the payoff based on the underlying value, updating user balances, and distributing fees.

1. Value Calculation:

   • Measured in paired currency using the 'getUnderlyingValue' function.

   • Strike value set by the writer, start value determined when the hedge is initiated.

2. Payoffs and Losses:

   • Payoff is the difference between market value and strike value, paid in underlying or paired currency.

   • Losses are immediately debited; profits are credited to the deposited balance.

   • Initial amounts are restored by moving funds from locked to deposited status.

3. Fee Distribution:

   • Fees are collected based on the currency of the payoff.

   • Settlement fees are collected into the protocol's balance and distributed as dividends to a staking contract.

4. Miner Involvement:

   • Miners can settle expired trades, crucial for Equity Swaps but not for Options.

   • Miners can only delete unexercised options after expiry.

   • Miners choose which deals to settle based on the tokens and amounts they prefer.

5. Wallet Tracking:

   • Wallets must log interactions with each token for accurate net worth valuations.

6. Revenue Handling:

   • Protocol revenues are stored in a user balance map.

   • Revenue is withdrawn manually and sent to the staking wallet.

Specific Conditions and Rules:

• Call and Put Options:

  • Can be settled by miners or the taker.

  • Takers can settle before expiry; after expiry, options are deleted and taxed.

• Equity Swaps:

  • Can be settled by either party after expiry.

  • Expedited settlement via Zap is possible if both parties agree, updating the expiry date to the current time.

• Zap Feature:

  • Available for Equity Swaps.

  • Allows for expedited settlement before the original expiry date.

• Collateral Management:

  • If the loser lacks sufficient collateral, all available collateral is used to pay the winner.

  • For Put Options, takers must exercise while collateral still holds value.

  • Remaining balance after payoff deduction is returned to the loser.

By following this criteria, Xeon Protocol ensures a fair and efficient settlement process, leveraging the incentives for miners to maintain the speed and reliability of the system.