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oCYPH

tip

Earned through liquidity farms & incentives. oCYPH can be converted 1:1 to xCYPH. oCYPH can also be converted to liquid CYPH by paying a % of the value in ETH. This ETH is used to buy back CYPH from the open market.

Incentives Distribution​

  • All incentives are distributed in oCYPH.
  • oCYPH can be converted 1:1 to xCYPH.
  • oCYPH can be converted 1:1 to CYPH by paying in ETH an amount equal to a % of the current CYPH price.

Conversion Cost (ETH)​

  • The percentage ranges from 30% to 60% (initial value adjustable in the future).
  • The movement from 30% → 60% is based on redeeming volatility — the more people redeem during a period of time, the higher it goes (and inversely).
note

Higher aggregate redemptions in a period increase the percentage - lower redemptions decrease it.

Exercising the Option​

  • It's possible to harvest oCYPH rewards and exercise the option later.
  • There is no time limit to exercise the option.

The Option Pricing Mechanism​

When exercising oCYPH for liquid CYPH, the cost you pay is determined by a dynamic pricing system that fluctuates between a minimum and maximum based on how much oCYPH has been exercised recently. This is managed by the OptionPricing contract using a buffer system.

Key Parameters​

  • Min Cost (30% of market price): The lowest cost, applied when nobody has exercised recently and the buffer is empty.
  • Max Cost (60% of market price): The highest cost, applied when the buffer reaches or exceeds max capacity.
  • Max Capacity (200,000 tokens): The buffer level at which the cost reaches its maximum. The buffer can grow beyond this, but the cost stays at 60%.
  • Decay Per Second (4.63 tokens/sec): How fast the buffer drains back toward zero when nobody is exercising.

The Buffer​

The buffer is a running counter that tracks recent exercise volume. Think of it like a bucket that fills up when people exercise oCYPH and slowly drains over time:

  • Filling: Every time someone exercises oCYPH, the amount they exercise gets added to the buffer. The buffer has no hard cap — it can grow beyond the max capacity if exercise volume is high enough.
  • Draining: Every second that passes, 4.63 tokens are subtracted from the buffer (the "decay"). This happens continuously — the OptionPricing contract calculates how much time has passed since the last exercise and subtracts the appropriate amount.

What Max Capacity Actually Means​

Max capacity (200,000 tokens) is not a hard limit on the buffer — it is the threshold at which the cost reaches its maximum (60%). If the buffer exceeds max capacity, the cost simply stays at 60%; it does not increase further.

However, because the buffer keeps accumulating above max capacity, it takes longer for the cost to start coming back down. The buffer must first decay below 200,000 before the cost begins to decrease again. This means that periods of very heavy exercise activity create a longer cooldown at max cost.

How the Cost Is Calculated​

The cost slides linearly between min cost (30%) and max cost (60%) based on how full the buffer is relative to max capacity:

                    costRange × buffer
cost = minCost + ──────────────────────
                      maxCapacity

Where costRange = maxCost - minCost = 60% - 30% = 30%.

In plain terms:

  • Buffer at 0 (empty) → You pay the minimum 30% of market price
  • Buffer at 200,000 (at max capacity) → You pay the maximum 60% of market price
  • Buffer above 200,000 → Cost stays capped at 60%, but the buffer must decay back below 200,000 before the cost starts dropping
  • Buffer anywhere in between → The cost scales linearly

Step-by-Step Example​

Assume CYPH is trading at $1.00 on the open market and the buffer starts empty.

Exercise 1 — Alice exercises 50,000 oCYPH

  • Buffer goes from 0 → 50,000 (25% of max capacity)
  • Cost = 30% + (30% × 50,000 / 200,000) = 30% + 7.5% = 37.5%
  • Alice pays $0.375 per CYPH in ETH

Exercise 2 — Bob immediately exercises 100,000 oCYPH

  • Buffer goes from 50,000 → 150,000 (75% of max capacity)
  • Cost = 30% + (30% × 150,000 / 200,000) = 30% + 22.5% = 52.5%
  • Bob pays $0.525 per CYPH in ETH

Exercise 3 — Carol immediately exercises 200,000 oCYPH

  • Buffer goes from 150,000 → 350,000 (175% of max capacity — well above the threshold)
  • Cost is capped at 60% (max cost)
  • Carol pays $0.60 per CYPH in ETH
  • The buffer is now 150,000 tokens above max capacity, so the cost will stay at 60% until the buffer decays back below 200,000
info

~9 hours pass with no exercises

  • Decay over ~9 hours = 4.63 × 32,400 ≈ 150,012 tokens
  • Buffer drains from 350,000 → ~199,988 (just below max capacity)
  • Cost finally starts dropping below 60%

~12 more hours pass (~21 hours total since Carol's exercise)

  • The remaining ~200,000 tokens decay away
  • Buffer reaches 0, cost is back to the minimum 30%

ETH Allocation on Redemption​

The ETH collected upon oCYPH → CYPH redemptions will be split as follows:

  • 75% — Immediately buy back CYPH, which will be accrued to xCYPH stakers.
  • 20% — Stored in a strategic reserve for internal CYPH market making.
  • 5% — To the Core Contributors.