CDS

What is CDS?

On the GyroX platform, there are three roles related to a CDS product, namely the Issuer, the Liquidity Provider (LP), and the Subscriber.

• The Issuer has the right to define the event of default and then issue CDS.

• The Liquidity Provider who agrees with the standings of the Issuer will add liquidity to this CDS pool, assuming the role of "CDS dealer".

• The Subscriber who takes an opposite view of the default event will buy CDS by paying the "subscription fee".

Simply put, the Issuer plus the Liquidity Provider form an opponent for the Subscriber, and by choosing different roles users are able to take a stand on the default event and build their risk positions.

The CDS is the voucher for Subscribers to claim rewards when the event defaults within the valid period, whereas if the default event does not occur the Issuer and the Liquidity Provider can claim their revenue out of "CDS sales". Part of transaction fees will be rewarded to the Issuer as incentives for CDS creation.

How do I issue a CDS?

Owning or leasing an NFT Ticket is the premise for GyroX users to issue a CDS. On the webpage of "Market", NFT Ticket holders can freely issue a specific-designed CDS product by choosing to put up an NFT Ticket or a number of crypto assets as collateral. Detailed descriptions for CDS are required to be filled out, including the category, explanation for the forecast event, the expiry date, and the default odds.

GyroX as the platform will review each CDS product before it is issued and published on the Market, and meanwhile, the Issuers can check the review status at the webpage of "Liquidity". For those CDS applications that cannot meet the requirement, mostly out of vague definition problems, the Issuer needs to re-edit the description of the forecast event or just cancel and withdraw their collaterals.

Once the CDS passes the review, it will be automatically listed on the "Market" page for Liquidity Provider and Subscribers to participate.

What type of CDS can be issued?

Initially, GyroX supports users to issue a broad spectrum of CDS events covering society, technology, finance, sports, crypto assets, and others. More markets will be introduced with the construction of the GyroX community.

How do I set the price and amount when I issue a CDS?

There is actually no such concept as price and amount. CDS subscription runs a similar way to an open-end public fund subscription, where there will be a minimum and maximum limit of CDS shares subscribed. Based on the full-security-deposit mechanism, the maximum shares can be easily calculated by the collateral value divided by the default odds, both of which are decided by the Issuer in advance.

Let us say that an Issuer stakes 50 USDT as collateral, and sets a 10 times default odds. In this case, the maximum shares would be 5 USDT whereas Subscribers can choose either to buy at least 1 USDT of CDS share and get 10 USDT of rewards if defaults, or subscribed to the maximum shares according to their hedging needs.

The maximum CDS shares allowed to subscribe will be largely escalated once the CDS is issued on the "Market" and captures Liquidity Providers to participate. A good CDS attracts its participants and makes the cake bigger.

How do I provide liquidity and/or obtain a CDS?

On the "Market" webpage, users can browse all released CDS products, and click the "Provide Liquidity" button or "Subscribe" button in the corresponding column of the interested product. Then the CDS they participate in will be displayed on the webpage of "Liquidity" and "Portfolio" respectively, where they can check the outcome status, claim rewards and appeal if there is a dispute.

The "Liquidity" webpage also allows both Issuers and Liquidity Providers to add more liquidity to the targeted CDS pool, check the revenue of selling CDS, as well as withdraw their remaining liquidity according to their proportion.

How do I claim when CDS defaults?

Subscribers are able to check the outcome status of the CDS they subscribed to on the "Portfolio" webpage. If the outcome is confirmed as "Defaulting" and meanwhile during the 7-day waiting period no appeal is made by either party, the smart contract will automatically make a settlement, and then Subscribers can claim their rewards.

Who decides if CDS defaults? T he CDS Issuer is responsible for the confirmation of the outcome of the event. It is allowed for CDS Issuer to confirm in advance when the event occurs, considering it would shorten the investment period and improve the capital efficiency of all participants. Normally, the confirmation action is required to be completed within 3 days of the product expiry, otherwise, the outcome of the CDS event would be deemed as defaulting.

After the CDS outcome is confirmed, both Subscribers and Liquidity Providers will be notified of the outcome of the event, and there will be a 7-day waiting period window open for Liquidity Providers and Subscribers to express their discontent with the outcome and appeal.

Appeals will be admissible by DAO governance after the GyroX governance model is launched. Appellants need to pay an amount of deposit and get it returned along with the settlement of claims. The Issuers who do not confirm in time or do not make the right confirmation, and appellants who make hostile appeals will be punished.