What Is YFPRO Finance (YFPRO)?
YFPRO Finance use the nomenclature of minting to representing depositing assets into a pool and receiving an LP token as a result. Similarly, they use the nomenclature of burning to represent returning an LP token to the protocol and redeeming an any asset, of the redeemer’s choice, from the liquidity pool. When you mint LP tokens, you can do so by providing any asset to the basket, however, keep in mind that minting and burning both function similarly to a swap, in the sense that you can affect the actual weights in the basket by doing so.
YFPRO Finance basket has both target and actual weights of 50% LUNA, 50% UST. An LP decides to mint LP tokens by providing a lot of LUNA and shifts the actual weights to say 90% LUNA, 10% UST, they will incur a spread of close to 60 basis points. If one were to burn LP tokens at this point and take UST out of the basket, moving the distribution to 95% LUNA, 5% UST in the process, they would experience a spread of even closer to 60 basis points as they take such an action.
YFPRO Finance Storage Key Points
|Coin Name||YFPRO Finance|
|Source Code||Click Here To View Source Code|
|Explorers||Click Here To View Explorers|
|Twitter Page||Click Here To Visit Twitter Group|
|Whitepaper||Click Here To View|
|Official Project Website||Click Here To Visit Project Website|
Fees and Risks
As an LP, you are betting that traders lose more often than they win. Fortunately, this is historically correct to assume over the long run. The odds of traders losing when you take funding rate and position fees into account is even higher. The value of LP tokens in a given basket should reflect the market price for crypto-assets within that basket with dampened volatility. This dampened volatility comes from the fact that the basket is comprised of half stables and half native crypto assets.
If the basket of assets does have any unoccupied amount of a particular asset, traders cannot swap to that asset, nor can they take out leveraged positions with that asset. Inflows to the value of LP tokens come as traders lose, not inclusive of fees. Fees are paid out separately to LP tokens in the form of YFPRO Finance. All fees are converted in kind to LUNA and able to be claimed at any point in time from a Tsunami vault contract that stores LUNA.
Where does 0% slippage come in? Price oracles. They use price oracles to get up-to-date global pricing from the market. YFPRO Finance will be going live with either Pyth, Band, or Chainlink oracles after considering the accuracy and cost of the services. When a trader makes a trade they do so at a price that the Price Oracle quotes with a spread(0-60bps) tacked on depending on how much the trader moves the actual weights towards or away from the target weights.
If there are 200LP tokens out standing and the value of all assets in the basket are worth $200, then a TLP token is worth $1 and can be redeemed for $1 worth of any underlying asset at any time. If there is a large sudden market upswing, long traders will be in profit and since most traders go long, the LPs will experience an unrealized loss in such a moment.
How does leveraged trading work?
YFPRO Finance users deposit collateral with the same asset they they wish to go long on. Then the trader specifies the amount of leverage they wish to take, and that amount of leverage becomes reserved in the Liquidity pool. Until that trader’s position is closed, the reserved amount in the Liquidity Pool is occupied and cannot be swapped for nor reserved by any other traders. Additionally, LPs cannot redeem any quantity of reserved assets. When a trader opens a position they can have full confidence that their position is backed with the amount of specified asset they have reserved.
When a trader wishes to close their position, the position is settled in-kind, meaning they receive their payout in the asset they longed. If the trader closes a position in profit, they will receive any excess profit denominated in their longed token, if they are at a loss, the protocol will harvest the appropriate amount of the collateral from the trader. The moment the position is closed, the funds are available again to be reserved by any other trader on the platform.
If the price of the longed asset, LUNA, starts at $100 and the trader uses 10x leverage, their position is worth $1100. The Trader is long for 11 LUNA, and has an obligation to pay back $1000 to the pool when they close their position. Thus, the trader has 1 LUNA worth of collateral, and 10 YFPRO Finance of leverage, which is reserved LUNA from the LP. If the price of Luna decreases to $95, then the position is now worth $1045, but trader has an obligation of $1000 to pay back, meaning that they have a loss on their position of $55.
If the trader now decides to close their position, they can do so and leave with their remaining $55 worth of YFPRO Finance from their position. If the price of Luna increases to $105, then the position is now worth $1155, but trader has an obligation of $1000 to pay back, meaning that they have a profit on their position of $55. If the trader now decides to close their position, they can do so and leave with their $155 worth of LUNA from their position.