Fulcrom Liquidity Pool (FLP)
Overview
The Fulcrom Liquidity Pool ("FLP") is an index of tokens used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset.
The price for minting and redemption is calculated based on:
Total worth of assets in index including profits and losses of open positions / FLP Supply
Trading Counterparty
The purpose of the FLP is to provide a counterparty to the trading activity of traders on the platform. What this means is that when trades profit and close their position, their profit is taken from the FLP, decreasing FLP’s value. Likewise, if a trader makes a loss and closes their position or gets liquidation, their losses are taken from their collateral and given to the FLP, increasing FLP’s value.
Real Revenue and Yield
Furthermore, FLP holders are also rewarded with 60% of all the fees paid by traders on the platform, making FLP holders the largest beneficiaries of the transaction volume generated on Fulcrom.
Rebalancing to achieve ideal FLP state
Similar to LPs of stable swaps, there is no fixed proportion of tokens to be held in the pool. However, there will be costs and incentives associate with minting/redeeming FLP for tokens that have weights that vary from the ideal state of the FLP
Token weights are adjusted to help hedge FLP holders based on the open positions of traders. For example, if a lot of traders are longing ETH, then ETH would have a higher token weight, if a lot of traders are shorting, then a higher token weight will be given to stablecoins.
On a downtrend (shorting positions expected to increase), a larger weight will be given to stablecoins, intrinsic FLP value decrease is minimised, as compared to if a higher weightage of non-stablecoins were held. This works vice versa, if more traders are longing, a higher weightage will be given to non-stables.
Token swapping rates in FLP are determined according to FLP targeted state where token weights will be adjusted to help hedge FLP holders.
You can check FLP Index Composition under Analytics > FLP Pool
Buffer Amount
Fulcrom has set Buffer Amount for each indexed token according to their supply figures on Fulcrom.
The Buffer Amount is used to safegaurd the fund in pool, protecting users by monitoring the amount of a token that is reserved only for trading.
When Pool Amount in under Buffer Amount, swap function for that token will be disabled.
For example:
When ATOM pool amount is under Buffer Amount, swapping for ATOM in FLP is disabled, and you will see "Insufficient liquidity" on the display.
Under this situation, only ATOM is allowed to open long position or being added to the active ATOM long position as collateral.
Short positions will not be affected.
Once Pool Amount is larger than Buffer Amount, swapping and trading will be resumed automatically.
You may check the composition and performance of FLP on our Analytics page.
The team is also doing weekly review for this Buffer Amount parameter according to market situation and do manual adjustment if needed.
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