Perpetual Pool Token ComposabilityExploring the Possibilities of Composable Tokens - The Voyage Phase 3
Tracer Voyagers, we’ve explored a share of what Perpetual Pools V2 has to offer. It’s now time to set sail to a new island, and anchor up with our friends at Balancer to focus on the composability of Perpetual Pool tokens.
Perpetual Pools enables the creation of long term, non-liquidatable, leveraged tokens that live in your Web3 wallet. These leveraged tokens are fungible ERC20s and as such, can be used throughout the broader DeFi ecosystem.
For the Voyagers
Your mission this time is a little different to last. Rather than minting a pool token, your task is to provide liquidity to the Balancer pool and/or buy a pool token on Balancer for the new market:
- 3x Bitcoin settled in USDC.
This market may look familiar to the existing 3x BTC market, however it has a set of different pool parameters that are detailed in the FAQs below.
There are two guides that will come in handy this week:
Composability of Pool Tokens
With the help of decentralised exchange infrastructure like Balancer, pool tokens can be fully distributed throughout the DeFi economy. Trading on Balancer is just the tip of the iceberg; fungible ERC20s as a leveraged position open a world of opportunity:
- Use your 10x long ETH tokens as collateral to take a loan on Compound or Rari.
- Create a market settled in a leveraged pool token and increase your capital efficiency considerably. Leverage up on your leverage!
- Trade the tokens OTC with Airswap.
How does the new 3-BTC-12h market differ from the existing 3-BTC/USD market?
Rather than using an 8-hour SMA pricing mechanism, the new market tracks the spot price of Bitcoin. By tracking spot price, the new market has increased tractability and is easier to hedge, therefore reducing frictions for liquidity provision.
Furthermore, the new market rebalances every 12 hours. The 12h rebalance period significantly reduces the rebalance frequency from the existing markets which rebalance every hour. This mitigates the impact of volatility decay and enables longer holding periods.
You can compare the pool parameters for the two 3x-BTC markets in the documentation.
What are the differences between minting a token natively through Tracer, and buying a token on Balancer?
Both minting through Tracer and buying on Balancer are akin to opening a perpetual position, however they achieve this through different measures. If you buy a token through Balancer, you will instantly receive the token at a price determined by Balancer’s AMM. Whereas if you mint a token, you are required to wait until the next rebalancing event to occur for your collateral to be converted into pool tokens ready for you to claim.
What can I do on Balancer?
You can buy and sell pool tokens instantly on Balancer. To learn how, read the guide: Open a Position.
You can also use your pool tokens to provide secondary market liquidity on Balancer in exchange for a Balancer Pool Token (BPT). By supplying the secondary market, you can capture Balancer trading fees offered by the pool. Even more, you can stake your BPT in a Tracer staking farm to earn additional TCR rewards. To learn how, read the guide: Provide Liquidity on Balancer & Stake BPTs.
What are BPTs?
BPTs are Balancer Pool Tokens. These tokens represent a proportional share of the pooled assets in a Balancer AMM. Traders that deposit pool tokens into their respective Balancer AMMs will receive BPTs. TCR tokens are distributed as rewards to traders that stake BPTs in Tracer's staking interface.
Are there liquidity mining incentives for this new market?
Why Balancer over another AMM?
Balancer Pools were selected because they utilise a generalisation of the constant product AMM for more than two assets. This allows the creation of liquidity pools containing the Perpetual Pools collateral asset (USDC) and the long and short pool tokens. By creating a 3 asset Balancer pool, liquidity is concentrated in a single pool; and users can exchange all 3 assets while only incurring a single swap fee.