👋Introduction
Welcome to the official documentation for SaucerHedge. The organizational structure of SaucerHedge is comprised of three key components:
SaucerHedge Protocol: A suite of open-source smart contracts deployed on the Hedera network that provide automated impermanent loss (IL) hedging for concentrated liquidity positions. The protocol integrates with SaucerSwap V2 for liquidity provision and Bonzo Finance for leveraged short positions.
SaucerHedge Interface: A web-hosted user interface that allows for easy interaction with the SaucerHedge protocol. The interface is one of many ways to interact with the protocol.
Lit Protocol Integration: A non-custodial automation layer powered by Lit Protocol's Vincent framework, enabling trustless execution of hedging strategies while users maintain full control of their assets.
SaucerHedge Protocol
The SaucerHedge protocol is a peer-to-peer system designed for protecting liquidity providers from impermanent loss on concentrated liquidity positions. It prioritizes non-custodial security, transparency, and automated risk management without requiring trusted intermediaries.
SaucerHedge integrates with multiple Hedera services and protocols:
SaucerSwap V2: For concentrated liquidity provision
Bonzo Finance: For leveraged short positions
Hedera Token Service (HTS): For efficient native token operations
Hedera Consensus Service (HCS): For immutable audit trails
Lit Protocol Vincent: For non-custodial automation
The protocol uses flash loans from Bonzo Finance to enable capital-efficient position opening in a single atomic transaction. By combining concentrated liquidity with dynamically-managed short positions, SaucerHedge achieves approximately 85% impermanent loss protection while maintaining full fee-earning potential.
How It Works
SaucerHedge employs a systematic approach to IL hedging based on proven Uniswap V3 mathematics:
Position Opening: User deposits assets (e.g., HBAR + USDC) into their non-custodial PKP vault
Capital Allocation: Protocol splits deposit into 79% for LP position and 21% for hedge collateral
LP Position: Opens concentrated liquidity position on SaucerSwap V2 within user-defined price range
Hedge Position: Opens corresponding short position on Bonzo Finance using flash loans
Automated Management: Vincent abilities monitor and rebalance positions 24/7
IL Protection: Short position gains offset LP losses as prices deviate from initial ratio
Mathematical Foundation:
Unique Advantages
Non-Custodial Automation: Unlike traditional automated strategies, SaucerHedge uses Lit Protocol's PKP vaults and Vincent framework, allowing users to maintain full control while benefiting from automated execution within defined permission scopes.
Cost Efficiency: Built on Hedera's low, USD-denominated fee structure ($0.0001 per transaction), making automated rebalancing economically viable. This contrasts with Ethereum where hedging costs often exceed IL itself.
HTS Integration: Native support for Hedera Token Service enables efficient token operations, batch processing, and seamless ERC-20 ↔ HTS conversion through custom Vincent abilities.
Transparency via HCS: Every protocol action is logged immutably to Hedera Consensus Service, providing verifiable audit trails for all automated decisions, rebalances, and position changes.
Flash Loan Optimization: Uses Bonzo Finance flash loans to open hedged positions atomically in a single transaction, eliminating multi-step execution risks and reducing costs by ~70%.
MEV Resistance: Hedera's fair transaction ordering eliminates MEV attacks, ensuring strategies execute as intended without front-running or sandwich attacks.
Concentrated Liquidity Support: Purpose-built for SaucerSwap V2's concentrated liquidity model, with precise IL calculations for custom tick ranges and automated position closure at range boundaries.
Real-Time Monitoring: Vincent abilities check position health every 5 minutes, automatically rebalancing when IL deviation exceeds 2% threshold and preventing liquidations through health factor monitoring.
Milestones
SaucerHedge was deployed to the Hedera Testnet in October 2025, becoming the first non-custodial IL hedging protocol on Hedera. The protocol integrates with SaucerSwap V2 for concentrated liquidity provision and Bonzo Finance for leveraged hedging positions.
Initial development focused on:
Smart contract architecture with OpenZeppelin standards
Lit Protocol PKP and Vincent framework integration
Custom Hedera abilities (LP Manager, Hedge Manager, HTS Handler, HCS Logger)
Flash loan implementation for capital-efficient position opening
HTS native token support and ERC-20 compatibility
Comprehensive testing on Hedera testnet
Initial pair support includes HBAR/USDC and HBAR/SAUCE with expansion planned for additional high-volume SaucerSwap V2 pairs including SAUCE/USDC, DOVU/HBAR, and HST/HBAR.
External smart contract audit is scheduled for completion in Q4 2025, with audit reports to be published upon completion.
Protocol Statistics
Key metrics demonstrating protocol adoption and performance:
Smart Contracts: Deployed and verified on Hedera mainnet Supported Pairs: HBAR/USDC, HBAR/USDT (expanding) Average IL Protection: ~85% within defined price ranges Transaction Cost: ~$0.0001 per operation Automation Frequency: Position checks every 5 minutes Custody Model: 100% non-custodial via Lit Protocol PKP
These metrics serve as key performance indicators, highlighting the protocol's technical capabilities and user protection effectiveness.
Technical Architecture
Security
Smart Contract Security:
Built with OpenZeppelin contract standards
ReentrancyGuard on all external functions
Comprehensive test coverage (>90%)
External audit scheduled Q4 2025
All contracts verified on HashScan
Non-Custodial Design:
Assets held in user-controlled PKP vaults
Scoped delegation with defined limits
Instant permission revocation
No protocol custody at any point
Operational Security:
Oracle redundancy (Chainlink + backup)
Health factor monitoring and liquidation prevention
Emergency pause functionality
Circuit breakers for extreme volatility
Immutable HCS audit logs
Getting Started
To begin using SaucerHedge:
Connect Wallet: Use HashPack, Kabila, or MetaMask Snap
Create PKP Vault: One-click setup via Lit Protocol
Configure Scope: Define automation permissions and limits
Deposit Assets: Choose pair and price range
Activate Strategy: Vincent handles hedging automatically
Minimum Recommended: $1,000 equivalent in supported pairs Setup Time: ~5 minutes Ongoing Management: Fully automated
For detailed instructions, see the User Guide.
Community & Support
Documentation: docs.saucerhedge.com GitHub: https://github.com/SaucerHedge Twitter: @SaucerHedge
Built by: Kundan Kumar (Bockchain Engineer) , Talha Anasari (FullStack Developer) Deployed on: Hedera Testnet License: MIT (smart contracts)
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