Use Case - Hedging DeFi Farming with MetalSwap

MetalSwap Use Cases [BLOG]3-1

MetalSwap, thanks to its innovative Hedging Contracts, is a dApp with infinite use cases in the world of DeFi and beyond.

In today's article, we want to focus on summarizing the potential of this dApp, specifically when used as a tool to maximize your DeFi farming strategies.

MetalSwap Use Cases

Over the past few months, the contributors have developed and shared in MetalSwap’s official blog more and more use cases that involve the dApp in DeFi farming operations.

Many dApps share their revenue with token stakers of the project. However, often, these cryptos are highly volatile and it's risky to hold and stake them to obtain the platform's revenue. Thanks to MetalSwap, you can participate in revenue-sharing processes without exposing yourself to the underlying asset's price, a true revolution that transforms farming in the DeFi world.

Two types of coverage

There are two types of coverage that the MetalSwap dApp can offer to those engaged in DeFi farming operations.

The first type, namely hedging on the countervalue, involves opening hedging positions based on the counter value used to be eligible for a specific dApp's revenue-sharing process.

The second type, namely hedging the future profit, involves opening hedging positions on future profits resulting from a farming activity, with the goal of obtaining a safe and stable cash flow over time.

Hedging on the countervalue - ETH staking on Lido

Lido is the most used dApp for the liquid staking on ETH and the staking of this asset is one of the most used strategies for farming in DeFi.

With a revenue close to 4%, the ETH staking represents a relatively low risk strategy for investors in DeFi, but a challenge lies ahead. For participating in the staking you must lock your ETH, that could gain or lose value in this process due to market volatility.

Thanks to MetalSwap it is possible to open an Hedging Position that will cancel the volatility of the underlying asset, reducing the general risk of this strategy.

With this strategy you will reduce the final revenue of the strategy but you will be sure that your countervalue will remain stable in the process. 

If you don’t know how a Short position works on the MetalSwap dApp ,we suggest reading this article, where the mechanics is simply explained.

Hedging the future profit - ETH revenue from Lido

As we saw before, you could protect the counter value of your ETH staking position to reduce the volatility of the underlying asset and reduce the general risks of this strategy.

But, if you are not interested in protecting the countervalue but you want a predictable cash flow situation, you can use another strategy on MetalSwap.

As the profit of the Ethereum staking paid in ETH is volatile based on the price movements of the asset. You could open hedging positions on future profits derived from the staking operation and obtain a constant and secure cash flow protected from the underlying asset's volatility. 

Thanks to the hedging position based on the predicted future revenue,  you will have a constant and stable gain from your strategy.

Read here a practical example of the Long position use case.


For the first time in DeFi history, thanks to hedging contracts, you can protect your DeFi farming operations against the volatility. MetalSwap has an infinite number of real use cases and the two strategies shown before are just a small part of all the possible utilization of the dApp.

The MetalSwap community, through the Governance Forum and the DAO, will need to express its opinion on the implementation of new assets, such as GMX or other cryptos.

✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts on financial markets with the aim of providing coverage to those who work with Digital Asset and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.