Crypto Asset-Backed (Pool 1)

FLP.1

Asset-Backed Trading

Asset-Backed Perpetual Swaps are derivatives where positions are backed by the underlying asset they represent. Traders can borrow the price exposure of the asset from the pool and the availability of the assets in the pool guarantees the settlement is possible of the Perpetual Swap contract at any given time.

Due to this nature of asset backing, the Trader can always be assured of settlement when they desire to close the position and the PnL will always be guaranteed from the underlying assets backing the Perpetual Swaps. This also reduces the need for a large insurance fund as there is always a guarantee of liquidity for settling a Trader’s position from the pool.

Asset-backed Perpetual Swaps are paid out in the native asset itself. This makes the Perpetual Swap less dependent on the stable coins and any form of counterparty risk associated with them.

All trades will be collateralized by the token they wish to long. For example, if the Trader intends to long SOL with leverage, then they must use SOL their collateral. Otherwise, the protocol swaps any other token brought by the user to SOL before opening the position.

Note: The swapping of the token is done dynamically by the protocol on the backend and the user will incur a swap fee in the process.

Example 1: - Trader 1 brings 1000$ worth of USDC and wants to long ETH at 10x leverage. Assuming ETH’s price is $2,000. When the trader places the order, the protocol swaps the $1,000 USDC to ETH on the backend and opens a position of 5 ETH (Note: This does not take into account the swap fee, opening fee, and borrow fee).

When the trader wants to short a crypto asset, they must use a stable coin to open the position. If the trader wants to short ETH then they must bring USDC to short ETH. Otherwise, the protocol swaps any other token to a stable before opening the position. Asset-Backed Pool The collateral backing for the perpetuals built on top of such a pool is provided by the spot assets in the pool. Here only the perpetual contracts of the asset in the pool itself can be initiated. There are no limitations on PnL of traders as the pool will always have the native asset to payout a long position or a stable coin to payout a short position.