Perp Pools Deposits
What are Perp Pools?
Liquidity providers deposit $USD to perp pools on Demex to add liquidity to perp markets, and receive $CLP tokens in return.
$CLP tokens are yield-bearing tokens that signify your proportional share of the provided liquidity. These tokens also continuously accrue yield with every block.
How do $CLP tokens earn yield?
$CLP earns from trading APR, which comprises the following:
High Maker Rebates: When a trade is executed using your liquidity, you earn maker rebates, and Demex has one of the highest maker rebates (>5bps for devnet), rewarding you for adding liquidity to the market and promoting order book depth.
Funding Rate: As part of the perpetual trading mechanism, funding rates are exchanged between traders. Liquidity providers can also earn a share of these funding fees for their contribution to the pool. Perp pools have a unique funding rate mechanism to rebalance the skew between longs and shorts in order to protect LPs during large market swings.
Trader PnL: You will receive a portion of the losses generated by traders who utilize the liquidity in the Perp Pools for their trades.
What happens when I deposit?
When you deposit $USD into the Perp Pools, your funds are automatically used to increase liquidity in the linked perpetual markets following a specific market-making strategy.
Let's illustrate this with an example:
Suppose you deposit $1,000 into a Perp Pool that's linked to BTC-PERP and ETH-PERP. Upon your deposit, a $1,000 bid and a $1,000 ask near the Index price will be added to each of these markets (BTC-PERP and ETH-PERP). Thus, your $1,000 liquidity contribution effectively generates $4,000 in order book liquidity.
In short, the $USD deposited into the Perp Pool will be utilized as liquidity for the BTC-PERP and ETH-PERP market. Traders will have the opportunity to place orders and trade against the liquidity supplied by the perp pool.
The bid and ask prices are kept close to the Index price to provide traders with competitive rates. These prices are frequently updated to match the Index price.
Whenever a trader utilizes the liquidity, that amount is simultaneously deducted from elsewhere in the pool, maintaining the overall liquidity balance.
Click here to find out more about how it works.
How To Deposit to Perp Pools
Locate 'Perp Pools by Fluo' on the page.
When you click 'Go to Vault', you will be directed to the Base Vault.
Decide how much $USD to deposit.
You will receive $CLP corresponding to your deposit.
Now that you have $CLP, you can stake them as well to earn more rewards.
Funding Fees
When trading on a perp market that has liquidity provided by a perp pool, the funding fee includes the borrow fee which is calculated based on the pool's utilization rate.
For devnet, the borrowing fee at max utilization will be 1% per hour for testing purposes.
The borrow fee also has a time-weighted average multiplier that increases the bps every hour when the skew between the longs and shorts are imbalanced by up to 10x.
Benefits
Utilizing Perp Pools by Fluo offers the following advantages:
Competitive Prices: Access liquidity that is priced near the Index Price, leading to more competitive trades.
Tight Spreads: Enjoy trading with minimal to no spread, resulting in more favorable trading conditions.
Lesser slippage: Experience smooth and efficient trading with deep liquidity, reducing the impact of slippage.
Interested in becoming an LP? Perp Pools empower anyone to become an automated market maker on Demex, enabling them to earn trading APR along with exciting bonus rewards for their active participation as liquidity providers. Learn more here!
More detailed instructions and images are available on the next page.
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