💠VMLP
VMLP is the platform's liquidity provider token.
Overview
VMLP 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 (total worth of assets in index including profits and losses of open positions) / (VMLP supply).
For Avalanche, holders of the VMLP token earn Escrowed VMC rewards and 70% of platform fees distributed in AVAX. 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.
Staked VMLP token address (Avalanche):
Note that VMLP is specific to the network you mint it on, it is not directly transferrable between networks and the price / rewards to the tokens will differ between networks.
As VMLP holders provide liquidity for leverage trading, they will make a profit when leverage traders make a loss and vice versa.
Minting and Redeeming
Minting VMLP
Bridge any of the VMLP tokens to Avalanche, a list of VMLP 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
For Avalanche, ensure that you have some AVAX for network fees
Key in the amount of VMLP you'd like to purchase on: https://app.vmfinance.io/#/buy_vmlp
Fees for buying VMLP will vary based on which assets the index has less or more of, the Buy VMLP page will show which assets have the lowest fee.
After buying your tokens will automatically be staked and you will start earning Escrowed VMC and ETH / AVAX rewards, you can check your rewards at https://app.vmfinance.io/#/earn.
Redeeming VMLP
Key in the amount of VMLP you'd like to redeem at https://app.vmfinance.io/#/buy_vmlp#redeem.
Rebalancing
The fees to mint VMLP, burn VMLP or to 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 ETH and a small percentage of USDC, actions which further increase the amount of ETH the index has will have a high fee while actions which reduces the amount of ETH the index has will have a low fee.
The token weights can be seen on the Dashboard.
Token weights are adjusted to help hedge VMLP holders based on the open positions of traders. For example, if a lot of traders are long ETH, then ETH 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 VMLP 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, then VMLP holders would have a synthetic exposure to the tokens being shorted, e.g. if ETH is being shorted then the price of VMLP will decrease if the price of ETH decreases, if the price of ETH increases then the price of VMLP will increase from the losses of the short positions.
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 some risks:
Smart contract risks
Counterparty risks: The VMLP pool is the counterparty to traders, if traders make a profit that comes from the value of the VMLP pool
Token risks: Bridged tokens may depend on the security of the bridge, pegged tokens have risks of depegging
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