# ETH Liquidity Pool

## What is Hegic ETH Liquidity Pool?

ETH Liquidity Pool is a **non-custodial smart contract**. You can provide ETH  to the pool and start **earning premiums in ETH**. No other user or organization will have an access to your funds.

ETH allocated on the ETH Pool contract are used for **selling ETH call options on Hegic**. ETH call options buyers pay premiums for a right to swap their DAI for ETH from the pool at a fixed price during a certain period. Liquidity providers have an obligation to swap buyers' DAI for ETH when they are exercising ETH call options contracts.

## How the Hegic ETH Pool Works?

ETH call options **buyers pay premiums for a right to swap their DAI for ETH at a fixed price during a certain period**. Premiums in ETH are distributed between ETH Pool liquidity providers right after the buyers pay them.

The amount of ETH on the ETH Pool contract **will be locked for the period that the buyer has paid for**. If a buyer does not exercise the contract during this period ETH will be unlocked for new contracts.

If a buyer exercises the contract, they swap DAI for ETH that was locked for them. DAI will be automatically swapped for ETH using a Uniswap pool and ETH will returned to the ETH Pool.

## How to Join the Hegic ETH Pool?

**Send ETH** to the pool contract. You will **receive writeETH** (ERC20) tokens that give you a share in the pool's profits and losses.

## How to Withdraw ETH?

**Send writeETH** tokens to the pool contract. They will be automatically burnt and you will **receive ETH** to your Ethereum address. **20% of the ETH liquidity pool** is always available for withdrawals by providers and cannot be locked on new options contracts.

## What are the Risks?

**You can lose up to 100% of your funds that you provide to the ETH Liquidity Pool contract.** Selling ETH Call Options exposes liquidity providers' capital to unlimited losses. There is **a technical risk** that the ETH Liquidity Pool contract can be hacked in the future. **Never provide more ETH to the ETH Pool contract than you can afford to lose.**

## How is the Premium Distributed?

**Premiums paid in ETH** by the ETH call options buyers are accumulated on the ETH Pool contract. Each time a new buyer pays a premium, the price of writeETH token increases. Because of that each writeETH token will give you a right to withdraw more ETH from the ETH pool contract.

## How are the Losses Distributed?

Each time a holder exercises an ETH call option contract with losses to ETH Pool liqudity providers, the price of writeETH tokens decreases. Because of that, each writeETH token can give a right to withdraw less ETH from the ETH Pool contract.

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