Prodigy.Fi Product 101 Series: Understanding Swap Likelihood
At Prodigy.Fi, Swap Likelihood is designed to tell you how likely your vault deposit (read: subscription) will get swapped upon expiry, based on real-time market data like price volatility, difference between current vs linked price, and time remaining. It takes complex trading probabilities and turns them into an easy-to-read indicator, so you can assess potential outcomes at a glance.
Instead of bombarding you with dense formulas and jargon, Swap Likelihood gives you an instant feel for your vault’s chances of swapping from one asset to another at expiry, helping you make more informed choices.
Let’s break it down.
What Is Swap Likelihood?
On Prodigy.Fi, the “Swap Likelihood” feature is a simple bar on our user interface that shows how likely your subscription to a vault will swap from one currency to another when it reaches its expiry date. Think of it like a progress bar in a game: the fuller the bar, the more likely the swap will happen. When the slider leans toward the blue side (left), the likelihood of a swap is higher. When it leans toward the green side (right), the likelihood is lower. It is similar to “delta” in traditional finance (TradFi), but we keep it numbers-free and easy to understand.
The swap likelihood is calculated using a model that looks at three key parameters, in which we will go through;
- What these parameters are.
- How they affect the swap likelihood (more likely or less likely to swap).
- A simple explanation of each parameter
For this walkthrough, we will assume a Sell-High vault setup, where a higher market price increases the chances of a swap. If your vault is a Buy-Low setup, the logic may work in reverse so always check your vault’s specific details before making decisions.
1. How Close the Current Price Is to the Linked Price
Direction: The closer the current price is to the linked price, the more likely the swap, and the higher the swap likelihood. If the current price goes above the linked price, the swap likelihood gets even higher, potentially maxing out the bar.
Explanation: The current price is the real-time market price of the asset your vault is tied to, such as ETH, BTC, etc. The linked price is the pre-defined target price that triggers the swap at expiry. For example, if your vault is set to swap when the asset’s price reaches $100 (linked price), and the current price is $98 or $102, the bar will fill significantly because the price is near or past the target. In contrast, if the current price is only $80, the bar will be less filled, indicating a lower chance of swapping.
2. Yield
Direction: The higher the yield set in the vault, the higher the swap likelihood (the bar fills more). Lower yields generally indicate a lower swap likelihood (the bar fills less).
Explanation: Every DCI vault includes a yield component, which is the return paid out to subscribers at expiry, regardless of whether a swap occurs. This yield is set by the vault creator and serves as an incentive for subscribers to participate. The yield level is directly tied to the perceived risk of a swap happening: if the vault has a higher chance of swapping (based on factors like price closeness, volatility, and time left), the creator typically sets a higher yield to attract subscribers, as it compensates them for the risk of having their assets swapped at the linked price. When a swap does happen, the creator earns a profit from the favorable terms, while subscribers must accept the swap. Conversely, lower yields often signal vaults with a lower swap likelihood, making them less risky but also less rewarding. This relationship helps balance the dynamics between creators and subscribers in the protocol.
3. Time to Expiry
Direction: The less time left until expiry, the more the current price and market volatility matter. If the vault is close to expiry and the price is hovering near the linked price, the likelihood bar will surge. Conversely, with lots of time left, there is more uncertainty and the bar may stay more moderate.
Explanation: Time affects market probability. With only 2 days left, even small price moves can quickly change the Swap Likelihood. With 30 days left, there’s more time for market fluctuations to play out, making outcomes less certain.
Like all models, Swap Likelihood is a simplification that acts as a guide to help you make more informed moves on Prodigy.Fi. The fuller the bar, the higher the probability based on current market inputs. But these conditions are never static as markets shift, prices fluctuate, and yields evolve over time.
So keep an eye on your vaults, use the Swap Likelihood feature as part of your strategy, and remember, on Prodigy.Fi, informed Brodigies make the smartest moves.
Disclaimer: The information provided in this article is for educational and informational purposes only and should not be considered financial, investment, or trading advice. ProdigyFi’s “swap likelihood” indicator is a simplified, model-based visualization intended to help users better understand potential swap outcomes at expiry. It does not guarantee or predict actual results, and market conditions may change rapidly. Users should conduct their own research, understand the risks involved, and consider their own financial situation before participating in any vaults or transactions on ProdigyFi. Past performance, yields, and swap likelihood indicators are not indicative of future outcomes.
More insights, less fluff. Follow to keep learning.
✱ Website: https://prodigy.fi/
✱ Web App: https://mainnet-base.prodigy.fi/earn
✱ X: https://x.com/ProdigyFi
✱ Telegram: http://t.me/@prodigyfi
✱ Discord: https://discord.gg/PBKGN76YDn
✱ Youtube: https://youtube.com/@prodigyfi_official