Providing Liquidity
MLP is the liquidity provider token. Liquidity providers earn fees from leverage trading, borrowing fees and swaps.
Overview
MLP consists of an index of assets used for swaps and leverage trading. It can be minted with any index asset and burnt to redeem any index asset. The minting and redemption price is calculated based on (total value of assets in the index including profits and losses on open positions) / (MLP supply).
Buying MLP
MLP tokens can be bought via the Buy MLP page. Any of the MLP index tokens can be used to buy MLP, a list of index tokens can be found on the Dashboard. Fees are lower for tokens that are in short supply in the pool.
Once purchased your MLP tokens will automatically be staked and you will start earning Escrowed MSH and ETH rewards, you can check your rewards using our dApp.
Selling MLP
MLP tokens can be sold using the Sell MLP page.
Token Pricing
There may be a spread for some index tokens, minting MLP will be based on the lower value of the index token and redeeming MLP will be based on the higher value of the index token.
For stablecoin tokens, the spread will be from the Chainlink price of the stablecoin to 1 USD.
The price of MLP will depend on the spread of the tokens in the pool as well.
Token Weights
Fees for minting MLPs, burning MLPs or executing swaps vary depending on whether the action improves or reduces the asset balance.
For example, if the index has a large percentage of ETH and a small percentage of BAI, actions which further increase the amount of ETH the index has will have a high fee while actions which reduces the amount of ETH the index has will have a low fee.
The token weights are as follows
BAI
25
ETH
25
USDbC
20
BTC
15
USDT
15
Token weights are adjusted to help hedge MLP holders based on the open positions of traders.
For example, if a lot of traders are long ETH, then ETH would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to BAI.
If token prices are increasing, then the price of MLP will increase as well, even if there is a larger number of open long positions on the platform. The portion reserved for long positions can be treated as stable in terms of its USD value since if prices increase the profits from that portion will be used to pay traders, and if prices decrease, the losses of traders will keep the USD value of the reserve portion the same.
If a lot of traders are short and larger weights are given to stablecoins, then MLP holders would have a synthetic exposure to the tokens being shorted, e.g. if ETH is being shorted then the price of MLP will decrease if the price of ETH decreases, if the price of ETH increases then the price of MLP will increase from the losses of the short positions.
Risks
Caution should be exercised when interacting with any smart contract or blockchain application. While risks are attempted to be mitigated through testing and audits, there is always a risk of vulnerabilities in smart contract code.
For details of contract operation please see Security.
A non-exhaustive list of risks:
Smart contract risks
Counterparty risks: The MLP pool is the counterparty to traders, if traders make a profit that comes from the value of the MLP pool
Token risks: Bridged tokens may depend on the security of the bridge, pegged tokens have risks of depegging
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