oTANGO tutorial
Last updated
Last updated
oTANGO is an option token for TANGO, inspired by the Bunni docs on oLit.
An option token allows you to redeem the underlying token at a discount. This mechanism aligns incentives among all parties:
It rewards early users who believe in the long-term success of the protocol by giving them tokens at a discounted price.
It allows the protocols to transfer cash gains from short-term airdrop farmers to its treasury.
It incentivises parties to hold the token as the discount becomes bigger with time.
Let’s unwrap this with an example:
Let’s assume the price of TANGO is $0.1. The discount curve shown below implies that 1 oTANGO grants its holder the perpetual right to acquire 1 TANGO at around a 20% discount.
An airdrop farmer can exercise the option to buy 1 TANGO for $0.08 on the Contango smart contract and sell it on a secondary market for $0.10, locking in a $0.02 profit, which is equivalent to a 20% gain.
Please note that the user does not necessarily need to bring the initial $0.08 to lock in a profit: he could initiate a flash loan for $0.08, exercise the option to buy 1 TANGO for $0.08, sell 1 TANGO token for $0.1, repay the flash loan of 0.08$ and lock in the $0.02 profit, all in one atomic transaction.
There's a twist: to further ensure that users are aligned with the protocol growth, the discount to which users can exercise oTANGO to redeem TANGO depends on the price of TANGO itself. The higher the price, the bigger the discount. This way, users are incentivized to hold in the hope of getting a higher discount.
To ensure that the airdrop program doesn’t put pressure below Contango’s seed valuation, the discount is set to 0 when the price is at $0.045, which represents an FDV of $45M. If the TANGO price is under $0.045, the redemption (or exercise) price remains at $0.045.
The discount is above 0% when the TANGO price is above $0.045.
The discount remains at 75% when the price is at or above $1.
The following chart and table show the discount relative to the TANGO price:
The conversion of points to oTango is fixed at 3x, meaning that for each point users receive 3x oTANGO tokens. More info on the airdrop can be found here.
The first step is to claim your airdrop. You just need to connect your wallet and click Claim oTANGO:
Once claimed, you can exercise a given amount of oTANGO to buy TANGO at a discount. To do that, simply input the quantity of oTANGO that you want to exercise: the UI will tell you the amount of USDC that you need to bring to complete your purchase of TANGO. Before executing, review the discount at which you're exercising the oTANGO option and the strike price.
