🐦Hybrid Liquidity Engine

Both our Multi-Asset Liquidity and Synthetic Liquidity engines are Peer-to-Pool models, which allow traders to take positions on/against the market while the pool serves as the counterparty. This means that all liquidity providers share in the PnL and fees accumulated from traders.

When the open interest exceeds the value locked for the engine, traders will not be able to open new positions.

Multi-Asset Liquidity Engine

This model uses tokens as collateral. Tokens can only be used to open long positions on their respective tokens (e.g., BTC tokens can only be used to long BTC positions). USD stables can only be used to open short positions. Any other collateral used to open a position will be automatically swapped to the respective trading token, e.g., opening a 50x Long on ETH with $1000 USDC will first swap the collateral into $1000 equivalent of ETH and then open up the position.

Whenever users take a long position on a market, the equivalent amount of tokens to the position size is reserved from the liquidity pool to be paid back to the trader when the position is closed, e.g., when opening a 10 ETH long, 10 ETH from the vault will be reserved and marked as "utilized". So, if the trader closes the position in profit, the profit will be paid towards the trader from the utilized ETH and the rest will go back to the liquidity pool.

Conversely, when users take a short position on a market, the equivalent amount of USDC will be reserved from the liquidity pool and marked as "utilized" before the position is closed.

Synthetic Liquidity Engine

The Synthetic Liquidity Engine utilizes USDC stablecoin as the sole collateral for all trading positions, regardless of the underlying market. This approach eliminates the restriction of liquidity providers to specific markets, enhancing capital efficiency and opening up a broader range of trading opportunities. Unlike other models that may not accommodate all coins in a "crypto index product," the Synthetic Liquidity Engine supports a wider array of assets. However, due to its reliance on USDC stablecoin as collateral, it does not support swapping functionalities.

Lending Liquidity Engine

The Lending Liquidity Engine is a pool that holds both token assets and USDC stablecoins. Traders can create lending pools for a specific trading pair by depositing both the token asset and USDC stablecoins.

If a trader wants to take a long position, they would need to borrow USDC stablecoins from the relevant lending pool. They would then use these stablecoins to swap into the specific token asset using liquidity from a decentralized exchange (DEX), such as 1inch or Uniswap.

Conversely, if a trader wants to take a short position, they would need to borrow the token asset from the lending pool. They would then swap this token asset back into USDC stablecoins.

In this way, liquidity providers for the Lending Liquidity Engine are not exposed to the risk of traders' profits and losses (PnL).