NLP

NLP is the platform's liquidity provider token.

Overview

NLP consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset. The price for minting and redemption is calculated based on (the total worth of assets in the index including profits and losses of open positions) / (NLP supply).

Holders of the NLP token earn Escrowed NAVI rewards and 60% of platform fees distributed in S. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees.

As NLP holders provide liquidity for leverage trading, they will make a profit when leverage traders make a loss and vice versa. Past PnL data, NLP price chart, and other stats can be viewed on the Analytics page.

Minting and Redeeming

Minting NLP

• A list of NLP tokens can be found on the Dashboard.

• Fees will be lower for tokens that the pool has less of, check the "Save on Fees" section to get the lowest fees.

• Key in the amount of NLP you'd like to purchase on the Buy NLP section of the Buy page.

Fees for buying NLP will vary based on which assets the index has less or more of, the Buy NLP page will show which assets have the lowest fee.

After buying your tokens will automatically be staked and you will start earning Escrowed NAVI and S rewards, you can check your rewards on the Earn page.

Redeeming NLP

Key in the amount of NLP you'd like to redeem in the Sell NLP section of the Buy page. Note that there is a minimum holding time of 2 hours after minting before you can redeem NLP tokens.

Rebalancing

The fees to mint NLP, burn NLP, or perform swaps will vary based on whether the action improves the balance of assets or reduces it. For example, if the index has a large percentage of S and a small percentage of USDC, actions that further increase the amount of S the index has will have a high fee while actions that reduce the amount of S the index has will have a low fee.

The token weights can be seen on the Dashboard.

Token weights are adjusted to help hedge NLP holders based on traders' open positions. For example, if a lot of traders are long S, then S would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to stablecoins.

If token prices are increasing, then the price of NLP will increase as well, even if a lot of traders have a long position on the platform. The portion reserved for long positions can be treated as stable in terms of its USD value since if prices increase the profits from that portion will be used to pay traders, and if prices decrease, the losses of traders will keep the USD value of the reserve portion the same.

If a lot of traders are short and larger weights are given to stablecoins. NLP holders would have a synthetic exposure to the tokens being shorted, e.g. if S is being shorted then the price of NLP will decrease if the price of S decreases, if the price of S increases then the price of NLP will increase from the losses of the short positions.