Zombie Carol runs an Ethereum mining operation. She believes that ETH gas prices will decline in the next two months and would like to use the token as a hedge and secure her future revenues now.
Zombie Carol mines on average 1,050,000,000 gas per month. Since each uGAS is equivalent to 1,000,000 gas, to fully hedge her revenue, Zombie Carol would need to mint and sell 1,050 uGAS-JAN21 tokens.
Since the Global Collateralization Ratio is 2.5 when Zombie Carol attempts to mint, she needs to deposit 183.75 ETH in order to receive 1,050 uGAS-JAN21 tokens (2.5 x 1,050 tokens x 0.070 ETH per token.)
Zombie Carol then connects to Uniswap and sells her 1,050 uGAS-JAN21 tokens for 0.070 ETH each and receives 73.5 ETH. Notice that net Zombie Carol is now committing 110.25 ETH (183.75 of WETH Collateral — 73.5 ETH received). And she could withdraw more collateral to be more capital efficient as long as she maintains the 1.25 Minimum Collateral Ratio.
Unfortunately, ETH gas prices rise and the median price for the last 30 days of January is 110 Gwei — resulting in the uGAS-JAN21 token settling at 0.110. Zombie Carol takes a loss of 42 ETH (1,050 tokens x (0.070–0.110)).
However, the higher gas prices in January resulted in higher revenues for her mining operation which offset the loss from her tokens. In the end, the uGAS token hedge resulted in Zombie Carol locking her mining revenues at 70 Gwei and provided her with certainty on her revenue amount.