# How Hedos Works

## Hedos' Solution

<figure><img src="/files/m4bKLTriTU2jedeNsO1A" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/7HPLIpvEBUX6X3F9U2kQ" alt=""><figcaption></figcaption></figure>

Using Hedos is simple and seamless for end users:

1. **Deposit into the Hedos Vault**\
   Users only need to deposit their stablecoins into the Hedos Vault. This process is designed to be straightforward, with no requirement for users to manage complex strategies themselves.
2. **Automated Delta-Neutral Strategies**\
   Once deposited, Hedos automatically deploys the assets into carefully designed delta-neutral hedging strategies. These strategies can involve multiple assets, liquidity provision, and derivatives, all structured to generate yield while minimizing exposure to market volatility.
3. **Auto Rebalancing**                                                                                                                                                 Markets are dynamic, so Hedos continuously monitors positions and automatically rebalances them. This ensures that the portfolio stays delta-neutral, adapting to changes in funding rates, price movements, or liquidity conditions.
4. **Consistent Yield, Reduced Risk**\
   By leveraging hedging techniques, Hedos ensures that price fluctuations do not affect user returns. Yields are derived from funding rate differentials, arbitrage opportunities, liquidity incentives, and trading fees - not speculation on market direction.
5. **Risk Management at the Core**                                                                                                                                         Hedos integrates multiple layers of risk management, including controlled leverage, diversification across strategies, and safeguards against protocol-level risks. This protects user funds while maintaining stable and predictable yield.

In essence, Hedos abstracts away the complexity of professional trading and risk management, allowing users to benefit from advanced strategies with just a simple deposit.

## Delta Neutrality

At the core of Hedos is its **delta-neutral strategy**, which ensures that farming yields are not affected by market volatility.

* The protocol hedges positions in a way that gains and losses from price movements offset each other.
* This neutrality allows Hedos to generate a consistent yield regardless of whether markets move up or down.
* As a result, users can farm with stablecoins while avoiding the risks typically associated with volatile crypto assets.

## Protocol Rewards

Hedos generates rewards by combining multiple yield sources within the Aptos DeFi ecosystem. These rewards are distributed to users after risk management and interest division mechanisms are applied.

**Sources of Rewards:**

* **Funding Rate Differentials**: Capturing positive funding rates from perpetual futures markets.
* **Staking & Farming Yields**: Base APY earned from protocols integrated with Hedos.
* **Liquidity Incentives**: Rewards from providing liquidity in pools.
* **Arbitrage & Optimization**: Extra yield from hedging opportunities and auto-rebalancing strategies.

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Report about Hedos APY and perpetual funding rate on Aptos
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