Peer to Pool

At the core of Peer-to-Pool liquidity provision is that the LP acts as a counterparty to the trader and fills orders without slippage, making it the most capital-efficient derivative liquidity provision model. In the order book model, the longs and shorts are counterparties to each other in the perpetual contract. The profit of longs is the loss of shorts, while the funding rate is transferred between longs and shorts, and the exchange is the recipient of trader's commission and clearing penalty.
In Qilin V2, LP is the counterparty of all traders, so the profit of traders is the loss of LP, and the loss of traders is the profit of LP. LP also receives the trading fee and the funding rate as sources of income. Liquidators earn liquidation rewards. LP's losses and profits are shared equally based on the share of each LP’s liquidity deposit in the Pool.

Rebase Funding Rate

Funding rate in CEX is determined by the positive or negative spread between the mark price and the index price. The funding rate is charged from the counterparty. The amount of funding rate charged per user is based on the size of positions held by the user. The time interval for collection is 8 hours.
In Qilin V2, the funding rate is charged from the direction of the unmatched positions. The amount of funding rate is determined by the size of the unmatched position. Funding rate payments are sent to the LP. The amount of the funding rate charged from each user is based on the number of positions held by the user. The collection interval for is one block, and a rebase mechanism is used for collection.
Dynamic Slippage
The Peer-to-Pool mechanism has the advantage of unconditional liquidity and zero-slippage order filling, which results in higher capital efficiency and better trading experience. At the same time, it bears a direct risk exposure for LP.
We introduce the dynamic slippage mechanism to manage LP risk in the Peer-to-Pool model. The slippage curve is determined by the unmatched position value and the pool asset value and applies the slippage to the TWAP price feed to finalize the price of a contract.
Slippage is applied on trades that increase the size of unmatched positions to add to the cost of opening positions, thereby reducing the number of users in that direction. For trades that reduce the size of unmatched positions, slippage is lowered, thereby incentivizing trades in the direction that reduces the risk exposure.
Last modified 1mo ago
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