Liquidity
Provide liquidity to earn 60% of protocol revenue.
Pool
LPBASE consists of many pools, and the LP token of each pool consists of an index of assets used for swap and leverage trading.
5Pool is the most core pool, composed of five tokens: wBTC, ETH, USDC, USDT, and DAI. 5LP, the LP token of 5Pool, will also be the most important asset in the entire ecosystem:
To form new pools with other tokens, such as forming LSD Pool with stETH and rETH, or forming DeFi Pool with PENDLE and LDO, etc.
Acting as collateral when shorting assets of other pools.
Serving as a bridging asset for swaps.
Each pool is exposed directionally to its underlying assets as well as acting as the counterparty to traders on the platform. If the prices of underlying assets are increasing, then the price of LP token will increase as well. Meanwhile, LP holders will make a profit when leverage traders suffer losses and vice versa.
Minting/Burning LP
LP token can be minted by any asset and burnt to redeem any asset in the associated pool.
LP Price = （Total USD value of assets in the pool + unrealized PnL) / (LP token supply)
The fees to mint or burn LP will vary from 0.00% to 0.65% based on whether the action improves or reduces the balance of assets in the pool. The fee decreases when the action brings the actual weight closer to the target weight and vice versa. Token weights are adjusted to help hedge LP holders based on the open positions of traders. Users can choose the token used by minting/burning LP according to the real-time fee rate.
Stake
LP can be staked into the associated pool and receive 20% of protocol revenue as rewards.
You can stake or unstake at any time. After staking, you will receive an sLP token which is the proof of staking, used to calculate the reward of staking, and cannot be transferred.
For details of staking rewards, please read the section Staking below.
LP Rewards
There are two kinds of rewards for LPs: "Compound" and "Staking".
Compound
50% of protocol fees generated from a pool are automatically compounded into the LP token of the pool, which inceases the value of each LP token without increasing the total amount of LP tokens.
The compound rewards of each pool are calculated separately.
e.g.
The net value of a given pool is $1,000,000 and the total amount of LP tokens for this pool is 100,000, then the price of LP tokens is $1,000,000/100,000=$10.
Assume that there is no asset price change and PNL change before compounding, and the compounded fee is $50,000.
Then the net value of the pool will be $1,050,000, while the total supply of LP tokens is still 100,000, the price of LP tokens will increase to $1,050,000/100,000=$10.5.
Staking
10% of protocol fees generated from each pool will be directed to LP stakers as rewards. The fees will be converted to LPs and distributed to LP stakers. You can "claim" or "compound" your rewards anytime.
Claim will transfer any unclaimed rewards to your wallet. Unstake LP will automatically claim any unclaimed rewards in the same transaction.
Compound will stake your unclaimed rewards to the pool.
Staking rewards are compensation for LPs when leverage traders make a profit. The leverage traders' PnL is checked daily to determine whether to issue rewards. If traders win on the previous day, the rewards will be issued; otherwise, the rewards will be accumulated until the next time. If the reward can cover the loss of LPs, the amount of reward issued will be the loss of LPs; otherwise, all accumulated rewards will be issued.
Except for 5Pool, the staking rewards of each pool are calculated separately. Since 5LP exists in multiple pools, the 10% fee from 5Pool (the basic pool) will partially enter into other pools as liquidity incentives. The ratio will be adjusted in time according to the amount of 5LP in each pool.
e.g.
Assumption：
There are 3 pools: 5Pool, LSD Pool, and Meme Pool.
The total fee from 5Pool is $1000, so the part for staking rewards is $1000*10%=$100.
The ratio of the 3 pools are 60%(5Pool), 25%(LSD Pool), 15%(Meme Pool).
Then the rewards for each pool will be：
5Pool: $100*60%=$60
LSD Pool: $100*25%=$25 & 10% fee from LSD Pool
Meme Pool: $100*15%=$15 & 10% fee from Meme Pool
Staking Rewards Calculation
The rewards for each liquidity pool are calculated separately. Each user's reward allocation is determined by the amount of LP tokens they have staked and the duration of their staking period within that specific pool.
The staking duration is recorded in hours, and the corresponding staking weight is calculated based on this duration. The longer you stake your LP tokens, the higher your staking weight will be.
Your staking duration will be reset to 0 when you unstake all of your LP tokens. However, if you unstake partially, your staking duration remains unchanged.
If you stake additional LP tokens to an existing staking position, the new staking duration is calculated as follows: New Staking Duration = (Initial Staked LP Amount * Previous Staking Duration) / (Initial Staked LP Amount + Additional LP Amount Staked).
For each pool,
Your staking points = Your staked LP amount * Your staking weight
Your rewards = Pool rewards * Your staking points / Total staking points.
Relevant data is based on the snapshot at the beginning of the day when the rewards are issued.
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