Liquidity Providers
Providing liquidity on volmex.finance
Last updated
Providing liquidity on volmex.finance
Last updated
Depositing collateral to mint volatility tokens, liquidity providers are an essential component of the protocol.
volmex.finance liquidity providers deposit stablecoin collateral (DAI at launch and soon more collateral types) and mint proportional amounts of volatility index tokens and inverse volatility index tokens.
The volatility index token and inverse volatility index token are two parts of a whole, which together can be redeemed for proporitional stablecoin collateral required to mint (less a 0.3% redemption fee). 250 DAI mints ~1 volatility index token (technically 0.999, less the minting fee) and ~1 inverse volatility token. This ratio is set to 250 for both BTC and ETH volatility markets.
The long volatility index token (e.g. ETHV) aims tracks the volatility index price. If the Ethereum Volatility Index is priced around ~110%, the index token should trade around $110, based on the threat of global settlement. Conversely, the inverse volatility index token is (e.g. iETHV) should trade around $140. It is possible for there to be a deviation between the volatility token price and the reference index.
Example:
Chad deposits 250 DAI and mints 0.999 Ethereum Volatility Index token [ETHV] and 0.999 Inverse Ethereum Volalitility Index token [iETHV] (after 0.1% mint fee). At this time, the Ethereum Volatility Index is priced around ~140%. Chad provisions his Ethereum Volatility Index tokens [ETHV] and Inverse Volalitility Index tokens [iETHV] to respective Uniswap or other AMM pools to earn trading fees. Chad can redeem his 0.999 Ethereum Volatility Index token [ETHV] and 0.999 Inverse Volatility Index token [iETHV] together for 249.25 DAI.
Liquidity providers can always redeem equal amounts of volatility tokens (e.g. 1 ETHV and 1 iETHV) for proportional stablecoin collateral.
The minimum protocol deposit is 25 DAI or USDC.
Minted volatility tokens can provisioned to Uniswap pools (e.g. ETHV / USDC or iETHV / USDC) to earn trading fees. Liquidity is concentrated among three primary liquidity pools for each index.
Currently, DAI and USDC are supported as collateral.
Volatility tokens minted with DAI are fungible with volatility tokens minted with USDC. Redeemers can select which asset they want to redeem for when redeeming. The Volmex web app displays how much USDC and DAI are available for redemption in the Volmex contracts.
1) To get started, use the Volmex app to deposit collateral and mint volatility tokens. Connect your wallet, enter the amount of DAI / USDC to approve, and mint.
2) Provision liquidity to the respective pools below.
