Worked examples

One contract followed from quote to payout, from every side. The figures are computed exactly as the protocol computes them.

The contract

A Lagos importer protects a 10,000 dollar invoice due in 30 days.

Term	Value
Market	USD/NGN Up cover (pays if the rate rises)
Notional	10,000 USDC
Today's rate	1,330
Strike	1,360
Structure and limit	Limited, 1,500
Tenor	30 days
Fair rate (example)	1.75%
Pool markup for 30 days	115%

The money at a glance

Example: a business protects 10,000 dollars for 30 days. The premium is 201.25 USDC.

1At purchase

Business

211.31 USDC

Premium and platform fee, paid once

Underwriters

The premium less the 2% liquidity fee, paid at once

197.23

BlockFinaX

The 5% platform fee (10.06) and the liquidity fee (4.02); the pool creator receives a share

14.08

Locked as collateral

The maximum payout, set aside from the underwriters' capital until expiry

1,052.63

2At expiry (rate settles at 1,420, above the 1,360 strike)

Collateral

1,052.63 USDC

The underwriters' capital locked at purchase

Business

The payout, less the 2% payout fee

442.11

BlockFinaX

The 2% payout fee

9.02

Underwriters

The unused collateral, returned to them

601.50

If the rate does not pass the strike, nothing is paid out and the full 1,052.63 returns to the underwriters.

1. The business pays

	USDC
Premium: 10,000 × 1.75% × 1.15	201.2500000
Platform fee: 5%	10.0625000
Total	211.3125000

2. Capital is reserved

Reserve: 10,000 × (1,500 − 1,360) / 1,330 = 1,052.6315789 USDC.

Two underwriters back the pool with 4,000 and 6,000 USDC free:

	Underwriter 1	Underwriter 2
Reserved	421.0526316	631.5789473

3. Underwriters are paid at once

Liquidity fee: 2% of 201.25 = 4.0250000. Net premium 197.2250000.

	Underwriter 1	Underwriter 2
Premium credited	78.8900001	118.3349999

4. Settlement

Rate at expiry	Business receives	Underwriter 1 result	Underwriter 2 result
1,340 (no payout)	0	+78.89	+118.33
1,420	442.1052632	−101.56	−152.34
1,550 (beyond the limit)	1,031.5789474	−342.16	−513.24

At 1,420 the gross payout of 451.1278195 is charged 180.4511279 to Underwriter 1 and 270.6766916 to Underwriter 2. Their remaining reserve returns to free money.

5. The business's position

At 1,420, the invoice costs the importer 900,000 naira more than at today's rate, about 634 dollars at 1,420. Protection paid 442.11 USDC for a cost of 211.31, a net 230.80 USDC. Protection started at 1,360, so the first 30 naira of the move (about 211 dollars on this invoice) was the importer's own, and the premium was the price of capping the rest.