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Rage Trade is a decentralized PERP trading protocol. It also provides yield for liquidity providers (LPs).
The ETH Perp trading highlights its centralized liquidity. The yield vaults are innovative and show the composability of DeFi. Currently it provides two major yield vaults: Delta Neutral GMX and ETH Perp.
The Delta Neutral GMX builds on top of the GMX protocol. In the GMX protocol, LPs provide liquidity by purchasing GLP token, which is a bucket of USDC, ETH, BTC, etc. When providing liquidity, LPs suffer from the fluctuation of the underlying assets.
The risk-on vault is essentially hedged GLP. Users earn the GLP yield with neutralized risk.
The vault helps LPs to hedge the underlying assets by 'shorting' the underlying assets (ETH and BTC). Note that ETH and BTC, together with USDC, made up of over 90% of the GLP token at the time of writing.
The vault initially does not hold any ETH and BTC. To short them, it requests a flash loan from Balancer and sells them into USDC on Uniswap V3. It borrows back ETH and BTC from AAVE and tries to maintain a borrowing health factor of 1.5. Well, the USDC swapped from Uniswap is certainly not enough as collateral to maintain the health factor. Therefore, some extra funds are borrowed from users to use as collateral.
The risk-off vault is where the protocol borrows money from users to use as collateral on AAVE. Therefore, users who deposit to the risk-off vault earn the AAVE deposit interest rate plus a portion of risk-on vault interest for the lent funds.
Let's think about a Uniswap V2 liquidity pool (ETH-USDC). When ETH goes up, the liquidity pool will have less ETH and more USDC. In other words, the pool sells ETH for USDC (shorting ETH).
Now we have deposited some liquidity into some DeFi protocol, say the tricyrpto on Curve. How do we reuse the liquidity for perp trading? By default, the tricyrpto token earns yield from Curve. When ETH price goes up, LPs short ETH. Some assets are transferred from Curve to Rage Trade to realize the price change, which is like Uniswap V2 impermanent loss. The protocol sets a 20% limit on impermanent loss.
Eth Perp liquidity pool allows LPs to earn yield from Curve and Rage Trade at the same time with constrained impermanent loss. In the meantime, Rage Trade gains sufficient liquidity to provide perp trading. A win-win.
Not financial advice.
Information is up to date as of Jan 2023.
Rage Trade is a decentralized PERP trading protocol. It also provides yield for liquidity providers (LPs).
The ETH Perp trading highlights its centralized liquidity. The yield vaults are innovative and show the composability of DeFi. Currently it provides two major yield vaults: Delta Neutral GMX and ETH Perp.
The Delta Neutral GMX builds on top of the GMX protocol. In the GMX protocol, LPs provide liquidity by purchasing GLP token, which is a bucket of USDC, ETH, BTC, etc. When providing liquidity, LPs suffer from the fluctuation of the underlying assets.
The risk-on vault is essentially hedged GLP. Users earn the GLP yield with neutralized risk.
The vault helps LPs to hedge the underlying assets by 'shorting' the underlying assets (ETH and BTC). Note that ETH and BTC, together with USDC, made up of over 90% of the GLP token at the time of writing.
The vault initially does not hold any ETH and BTC. To short them, it requests a flash loan from Balancer and sells them into USDC on Uniswap V3. It borrows back ETH and BTC from AAVE and tries to maintain a borrowing health factor of 1.5. Well, the USDC swapped from Uniswap is certainly not enough as collateral to maintain the health factor. Therefore, some extra funds are borrowed from users to use as collateral.
The risk-off vault is where the protocol borrows money from users to use as collateral on AAVE. Therefore, users who deposit to the risk-off vault earn the AAVE deposit interest rate plus a portion of risk-on vault interest for the lent funds.
Let's think about a Uniswap V2 liquidity pool (ETH-USDC). When ETH goes up, the liquidity pool will have less ETH and more USDC. In other words, the pool sells ETH for USDC (shorting ETH).
Now we have deposited some liquidity into some DeFi protocol, say the tricyrpto on Curve. How do we reuse the liquidity for perp trading? By default, the tricyrpto token earns yield from Curve. When ETH price goes up, LPs short ETH. Some assets are transferred from Curve to Rage Trade to realize the price change, which is like Uniswap V2 impermanent loss. The protocol sets a 20% limit on impermanent loss.
Eth Perp liquidity pool allows LPs to earn yield from Curve and Rage Trade at the same time with constrained impermanent loss. In the meantime, Rage Trade gains sufficient liquidity to provide perp trading. A win-win.
Not financial advice.
Information is up to date as of Jan 2023.
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