New Pool Type

Navigator Exchange with Degen Pools is a decentralized spot and perpetual trading platform designed to support low price impact trades with up to 100x leverage and minimal swap fees.

Trading is powered by unique asset pools, known as Degen Pools, which allow liquidity providers to earn fees from perpetual trades, liquidations, and swaps.

Navigator Exchange routes every order directly against Degen Pools and references oracle index prices instead of relying on an order book or external market makers. To ensure accurate pricing without wicks, Navigator Exchange continues to utilize Pyth Price Feeds, ensuring that liquidations occur only at fair market values.

Degen Pools

A Degen pool consists of:

• Index Price Feed: Long and short tokens will be opened / closed based on this price feed

• Long Token: This is the token that will back long positions

• Short Token: This is the token that will back short positions

For example, a market could be S/USD [wS-scUSD], in this case:

• Index Price Feed: S/USD

• Long Token: wS tokens back long positions

• Short Token: scUSD tokens back short positions

If a market is labelled as SWAP-ONLY, then the market only supports swaps and does not support leverage trading.

For single-token backed pools, both the long and short token would be the same, e.g. a single token wS pool would have both the long token and short token as wS.

Buying Degen Pools' Token

Degen Pools' Token can be bought using the Degen Pools page.

Steps:

• Select the "Market" and "Pool" of the token you'd like to purchase in the Degen Pools page

• There will be a positive or negative price impact depending on whether your purchase improves or reduces the balance of tokens in the pool

• The price impact will be shown in the "Buy/ Sell" box

• If the pool is mostly balanced, a large purchase may result in a large negative price impact, to avoid this, select the "Pair" option and buy the token with an equal USD amount of long token and short token

Selling Degen Pools' Token

Tokens can be sold using the Degen Pools page.

Note that since tokens in a market are reserved based on the total open interest of the market, the liquidity available for redemption is capped at the tokens in the pool multiplied by the pool's reserve factor minus the tokens reserved. If this capacity is reached, liquidity providers would need to wait for positions to close before selling the token or for liquidity to be deposited by other providers. The borrow fee rate in this case would also be higher which should help to incentivise deposits.

Token Pricing

The price of the token depends on the price of the long / short tokens and the net pending PnL of traders' open positions.

Fees from leverage trading and swaps will automatically increase the price of Degen Pools' tokens.

There may be a spread for some long / short tokens which would result in a spread when buying / selling tokens as well.

Degen Pools aim to maintain an equal worth of long and short tokens, so e.g. when the price of a long token increases there may be a positive price impact to incentivise selling of long tokens for short tokens to rebalance the pool. While this balancing is incentivised by the pool it is still possible for pools to not be balanced at times. If a pool keeps its balance, its pricing excluding PnL should mimic a pool that is 50% long token and 50% short token and that rebalances as price changes.

Hedging Open Interest Imbalance

While long and short open interest is incentivised to be balanced through funding rates and price impact, it is possible for long and short open interest to not be balanced at all times.

For liquidity providers that hedge this difference it should be noted that the difference that should be hedged would be the difference between the long / short openInterestInTokens values and not the difference in openInterest USD values.

Currently, long and short open interest is incentivised to be balanced based on the openInterest USD value, this will be changed to the notional value in the next contract iteration, this change will further help to ensure that trader PnL is hedged within a market.

Risks

Caution should be exercised when interacting with any smart contract or blockchain application. While risks are attempted to be mitigated through testing, audits and bug bounties, there is always a risk of vulnerabilities in smart contract code.

A non-exhaustive list of risks:

• Smart contract risks

• Counterparty risks: The Degen pool is the counterparty to traders, if traders make a profit that comes from the value of the Degen pool

• Token risks: Bridged tokens may depend on the security of the bridge, pegged tokens have risks of depegging

While counterparty risk is attempted to be minimized through funding fees and price impact it is not guaranteed that long and short positions will always be balanced. An additional case to note is that if, for example, long positions happen to be balanced with high leverage short positions and there is a sudden price spike, the high leverage short positions could be liquidated, temporarily causing an imbalance of longs and shorts.