Team Baklava Space would like to propose a liquidity support service, the objective is to bring liquidity to DApps on Avalanche.
Who are we?
Baklava Space is a synthetic asset creation and minting platform on Avalanche, apart from our existing synthetic platform, we are looking into building liquidity pools, as an extension of what we have been doing. This post is a request for comments / feasibility study.
Why is this important?
DApps needs liquidity and liquidity is costly.
In the case of DEXes, Baklava Space’s will provide a liquidity pool consisting of various stable tokens, acting as the counterparty to the trades on this DEX, when a trader long BTC, the pool shorts BTCs.
This liquidity pool is also applicable for DApps such as swaps, options vault, etc.
How do we achieve this?
Users deposit their tokens (eg: BTC, ETH, AVAX, sAVAX and stable) into our liquidity pool to gain yield. There is capital efficiency as the pool is deployed against traders.
Example. When Alice deposits $1,000 USDC into a pool which has $9,000 worth of tokens, Alice receives our imaginary BLP tokens representing her 10% claim to the pool $10,000 ($1,000 + $9,000). If there’s a trade done on this example DEX, the trader makes a trade and our liquidity takes the opposite position, if the trader gets liquidated the pool takes the $1,000 winnings and adds to the pool, making the pool $11,000 worth. Now Alice’s BLP token is able to claim 10% of the pool, which is $1,100. On the contrary, if the trader wins the pool drops to $9,000 and Alice’s claim is now reduced to $900. BLP is like an index fund, taking the counter position of traders.
Our BLP will have 3 elements for real revenue: capital gain/loss (Alice’s DEX example) + trading fees + esBAVA.
Gain/loss is distributed to BLP with the recomposition of assets in BLP (Alice’s example). Statistically, gamblers (traders) lose to the house (BLP). Based on GMX’s experience, gain was net positive by considerable margin in both bull (Apr - eoy 2021) and bear (2022 - now).
Trading fee is distributed to holders BLP (70%) and BAVA (30%). Eg: regardless of gain/loss, the maker/taker fees that traders pay to the platform are distributed to BLP and BAVA holders.
esBAVA is the Baklava Space platform’s inflationary reward and vested over a few months. BLP (70%) and BAVA (30%).
If you are familiar with GMX exchange, BLP is equivalent to their GLP tokens and BAVA is equivalent to GMX tokens.And if you are familiar with Synthetix.io, BLP’s position is SNX’s global debt pool position.
Let us know your opinion. @Jay