Providing Liquidity using ALP

What is ALP?

ALP is an aggregate of Axiodex liquidity pool assets curated for swaps and leveraged trading. Its value is derived from dividing the entire worth of indexed assets (including both gains and losses) by the ALP supply. Liquidity providers earn fees from leverage trading, borrowing fees, and swaps. The following links provide helpful information to learn more about Liquidity Pools (LPs) basics:

An ALP pool (Axiodex Liquidity Pool) consists of:

  • Index Price Feed: Long and short tokens will be opened / closed based on this price feed

  • Long Token: This is the token that will back long positions

  • Short Token: This is the token that will back short positions

For example, a market could be ETH/USD[ETH-USDC], in this case:

  • Index Price Feed: ETH/USD

  • Long Token: ETH tokens back long positions

  • Short Token: USDC tokens back short positions

If a market is labelled as SWAP-ONLY or SPOT-ONLY, then the market only supports swaps and does not support leverage trading.

Benefits of Holding ALP:

  • Obtain Escrowed AXN (esAXN) rewards.

  • Receive 70% of the platform fees in ETH. After setting aside referral bonuses and network fees (about 1%), the remainder is allocated amongst ALP holders.

  • ALP holders benefit as liquidity providers. In trading, their gains are inversely proportional to the losses of traders.

How to buy/sell ALP

  1. Minting (Buying) ALP:

    • Access ALP tokens via the Dashboard.

    • Specify the desired purchase quantity on the Buy page.

    • Fees are dynamic; the Buy page showcases assets with the most favorable fee.

    • Post-purchase, tokens are auto-staked, triggering reward accruals.

  2. Redeeming (Selling) ALP:

    • Indicate the amount of ALP you wish to redeem on the Buy page.

    • Note: A holding duration of at least 15 minutes is mandatory prior to ALP redemption.

Understanding Fees and Rebalancing:

  • Fee structures are contingent upon the rebalancing impact of a transaction.

    • As an illustration, if the index is ETH-heavy, augmenting ETH will incur higher costs, whereas decreasing ETH will be cost-efficient.

  • Token weights are visible on the Dashboard.

  • These weights evolve to insulate ALP holders, reflecting prevailing trading patterns.

    • For instance, if a significant portion of traders are bullish on ETH, it will command a higher weight. Conversely, bearish sentiment might increase the weightage of stablecoins.

Price Dynamics of ALP:

  • A surge in token prices corresponds to an uptick in ALP's valuation, irrespective of trader behavior.

  • The valuation of ALP mirrors market trends. For example, should traders short Etheruem and it underperforms, ALPs value might dip. However, should Ethereum excel, ALP's price might witness an uptick, owing to the incurred losses of those shorting.

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