Leverage Pools
About Automated Leverage Pool (ALP)
Automated Leverage Pool (ALP) is a pool of funds within the D4X ecosystem that provides leverage to traders. The ALP automatically lends money to traders who wish to open leveraged positions in the cryptocurrency market, amplifying their trading capacity. The ALP is an automated system that allows traders to take on leveraged positions in a decentralized and trustless manner.
The ALP facilitates on-chain margin trading by pooling funds from lenders. Traders can leverage these funds to amplify their trading positions, potentially increasing their profits on successful trades.
Primary and allowed coins
In every Automated Leverage Pool (ALP), there is a designated primary currency used for all fund deposits and storage. This primary currency is also the basis for leverage provision and the calculation of earnings. Additionally, the ALP specifies certain permitted coins, in which traders are allowed to open positions taking leverage in the primary currency.
Risk parameters
The parameters governing ALP include:
max leverage ratios,
interest rates on borrowed funds,
the pool's tolerance for position liquidation delays.
Rebalancing parameters
There are two ways of setting and changing parameters: by calling functions with DAO decisions and by decentralized automated tasks according to the algorithm with certain periodic
Max Leverage ratio
For example, Automation networks ensure the ALP operates smoothly, with smart contracts automatically adjusting leverage ratios and positions based on market conditions. This automated oversight is crucial in managing risk and safeguarding both traders' and lenders' interests.
Creation and management of ALP
The ALP is established by the D4X platform to facilitate leveraged trading. Its creation and maintenance are integral to the platform's functionality and are managed by smart contracts to ensure transparency and efficiency.
Actions with ALP
Deposit
Deposits into the ALP result in the minting of LP tokens, which represent the lender’s share in the pool.
Withdraw
Withdrawals burn the corresponding LP tokens and return the lender's contribution, plus any earned interest.
LP Tokens
LP tokens represent a claim on a portion of the ALP.
They are used to track contributions to the pool and allocate returns from the pool's lending and trading activities.
LP Token Redemption Issues
In cases where LP tokens cannot be redeemed, such as when all funds of ALP are locked in opened positions lender, the owner of LP tokens, could sell LP tokens on open market or transfer peer-to-peer to another lender for some reward, maybe with some discount for liquidity.
In this case of buyer or transfer receiver (a new owner of LP tokens) obtains with same right as a previous owner to redeem LP tokens when ALP funds will be unlocked from opened positions.
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