Welcome to Hotbit

Hotbit DEX is a spot and derivative decentralized exchange based on the TVL Primitive Protocol — LPBASE, driven by the community accumulated by Hotbit CEX since 2018.

What's LPBASE?

The concept behind LPBASE is rooted in addressing the contradictions and challenges currently facing the DeFi Lego ecosystem. Leading decentralized base protocols like Uniswap, Aave, and Chainlink have attracted a vast user base and accumulated significant Total Value Locked (TVL), giving rise to the metaphor of "DeFi Lego." Technologically, a financial product can be composed of various DeFi base protocols, allowing users to achieve complex multi-protocol interactions with a single operation, thereby realizing more sophisticated functionalities and execution effects.

Everything seemed promising... However, a different reality unfolded. The vast majority of new DeFi products did not utilize these existing successful base protocols. Instead, they forked nearly functionally identical underlying protocols and then built various extensions on top of them. But why?

The answer lies in the monopolistic interests formed around TVL. Leading base protocols like Uniswap have emerged as victors (for now) in the traditional capitalist market competition, capturing the most lucrative revenue in this domain. However, they have completely locked this revenue within the direct participants of the protocol, typically including TVL providers and protocol token holders. On the other hand, other applications integrated with these leading base protocols only gained the usage value of the base protocol's functionalities, without being able to benefit from the value captured by the base protocols themselves. Since these base protocols are often built on open-source smart contracts with complexity far lower than traditional software, new applications always attempt to replicate and integrate these base protocols themselves, re-entering the TVL war. However, the TVL in the leading base protocols is often underutilized, resulting in a massive waste of constantly reinventing the wheel.

LPBASE aims to create a new TVL Primitive guided by the principle of extreme "decentralism," paving the way for realizing the true potential of the DeFi Lego concept.

What is TVL Primitive from LPBASE?

The core driving force behind DeFi Lego stems from the funds locked in smart contracts, known as TVL (Total Value Locked). In LPBASE's design for various base protocols such as spot, margin, lending, and RWA, the fundamental operations involving fund inflows, redemptions, transfers, swaps, interest calculations, and fee calculations are extracted and constructed into a minimal set of operation functions. This set of functions serves as LPBASE's TVL Primitive. The primitive function design identifies the calling upper-layer applications, and based on the fee distribution parameters set in the LPBASE DAO, the fees collected from each function are instantly or periodically distributed to all relevant parties, with the weights descending from TVL contributors, upper-layer application operators, to the LPBASE DAO Treasury.

Among them, TVL contributors, as direct capital providers bearing market risks, also receive the highest proportion (60%) of fee compensation (e.g., Uniswap v2 LP providers receive 0.3% swap fee compensation). The upper-layer application operators, as the most crucial initiators in the DeFi Lego ecosystem based on various traffic sources, receive up to 35% of the fees. Since these upper-layer operators can directly benefit from the existing TVL and mature primitive functions, thereby saving significant cold-start costs, this greatly reduces their incentive to reconstruct the base protocols themselves. The LPBASE DAO Treasury receives the remaining 5% of fees, primarily used for iterative development costs and necessary market grants.

LPBASE Margin Features

Inspired by GMX V1, LPBASE continues the pool format, but with an enhancement. In addition to the base pool — 5Pool (composed of BTC, ETH, USDT, USDC, and DAI), LPBASE forms sub-pools using the 5LP (LP token of the 5Pool) combined with other highly relevant tokens from the same asset section. This approach aims to meet the need for asset diversification, enabling liquidity providers and traders to better achieve strategic asset allocation. Simultaneously, while striving to segregate the risk of individual pools, it also improves capital utilization. Unlike most LP tokens that merely serve as asset proofs for liquidity pools, 5LP is designed to function more like a growth fund, with 60% of the fees generated from the 5Pool being allocated to 5LP holders. Additionally, 5LP will serve as a bridging asset for swaps and as the collateral token when opening short positions in sub-pools.

LPBASE also introduced improvements to the calculation for short positions. When using 5LP as collateral for short positions, and when the value of the stablecoin or 5LP rises, traders can earn higher profits (denominated in USD terms). For more detailed information, please refer to Opening/Closing a position.