Adrena
  • About Adrena
    • ๐Ÿ‘๏ธVision
    • ๐Ÿ’‰What is Adrena?
      • โœจNo Liquidation Fees
      • ๐Ÿซ—Peer-to-Pool Perp Model (and the risks as a Liquidity Provider)
      • ๐Ÿ‹๏ธTrading Competitions
        • 0๏ธโƒฃPre-Season: Awakening
        • 1๏ธโƒฃSeason 1: Expanse
      • ๐Ÿ’ฝRPC and Trade Execution
    • ๐Ÿง€Fees
      • ๐Ÿ’ฐRevenue Sharing
      • ๐ŸฏWays to Earn Overview
      • ๐Ÿ’ฑBuybacks
    • ๐Ÿ‘พTrader Profile
    • ๐Ÿ“–Achievements
    • ๐ŸงชMutagen (Points System)
    • ๐ŸคReferral System
    • Audits
    • Bug Bounty Program
    • ๐Ÿ”—Useful Links
  • Tokenomics
    • ๐ŸซฆTokenomics Overview
    • ๐Ÿช™ADX
      • ๐Ÿค‘Distribution
      • ๐Ÿ’ธEmissions
      • ๐Ÿ‘ฅForms of ADX
      • ๐ŸฆบVesting
      • ๐ŸšฐStaked ADX - Rewards Emissions Schedule
      • ๐Ÿ”Staking and Duration Locked Parameters for ADX
      • ๐Ÿ—ณ๏ธVoting
    • ๐Ÿ’ŽALP
      • ๐ŸŒŠGenesis Liquidity [terminated]
        • ๐Ÿ’ฆGenesis Liquidity Program [Terminated]
      • ๐ŸšฐStaked ALP - Rewards Emissions Schedule [Terminated]
      • ๐Ÿ”Staking and Locked Stake Parameters for ALP
  • Technical Documentation
    • ๐Ÿ‘คGovernance Shadow Token
    • ๐Ÿค–MrSablier & MrSablierStaking (Open Source Keepers)
    • ๐Ÿ”ฎOracles and Price Feeds
    • โ˜ข๏ธ"Toxic Flow" Countermeasures
    • ๐Ÿช–Position Parameters
    • โŒšSablier Automation Threads (deprecated)
    • ๐ŸฆStaking Implementation Details
    • Terms and Conditions
    • Token Terms and Conditions
  • Guides
    • ๐Ÿ’ปHow to Change to Devnet in Phantom Wallet
    • ๐Ÿ’งHow to get Devnet SOL
    • ๐Ÿ’ฐHow to Get Tokens to Trade
    • ๐Ÿ“ˆHow to Open and Close a Trade
  • Reports
    • 21/11/2024 - BE - Increase Position, position.price miscalculations
    • 22/10/2024 - Upgrade staking accounting issue causing extra reward distribution
    • 12/10/2024 - BE - Borrow fees reset on position increase
    • 01/10/2024 - BE - Custody internal state for `Assets` reports too much locked collateral
    • 27/09/2024 - BE - Missing accounts reload during fee distribution
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  1. About Adrena
  2. What is Adrena?

Peer-to-Pool Perp Model (and the risks as a Liquidity Provider)

The goal of this page is to present the widely used but often unclear Asset Backed Perpetuals model (a la GMX)

Adrena platform uses an Asset Backed (or peer-to-pool) Perp Model (similar to what GMX introduced).

This ingenuous system removes a lot of risks usually present in order-book based perp DEXes.

One can think of this model as a PvE model rather than the usual PvP model, enabled by the Liquidity Providers (ALP holders) that provide liquidity to traders to leverage their trades.

In the usual order-book based perp-DEX, when a trader opens a position, the counterparty is another trader betting in the opposite direction. In that system, you'r limited by finding a counterparty, and you'r also very reliant on the liquidation system to be efficient in order to make sure that the winning trader gets his profits (and to prevent accruing bad debt as a platform).

In the asset backed based perp-DEX, a trader counterparty is... himself and the LP pool (depending of direction of the trade, see below).

In the case of a Long trade, the user borrow the long exposure of the asset based on his leverage from the Liquidity pool (there is no actual borrow, he locks assets in the pool borrows the long exposure) from there two outcomes:

  • trader is right, trader profits, the Liquidity Pool was deprived of the long exposure that goes to the trader instead. The pool does not loose capital, and accrues fees.

  • trader is wrong, trader eventually get liquidated on his initial collateral, the locked long exposure is released. The pool accrues fees.

In the case of a Short trade, the user borrows stablecoins from the Liquidity Pool based on the platform's maximum profit (100%). Short positions have a limited upside, that's a limitation/security of this model.

  • trader is right, trader profits, the liquidity Pool pays stable coins to the trader but accrues fees

  • trader is wrong, trader eventually gets liquidated on his initial collateral, the locked short exposure is released. The pool accrues fees.

As we can see, the model is not really Trader VS. Liquidity provider.. it is, but only partially depending of the actual trade direction. Also, traders losses don't go to the LP in our model, the revenues are entirely originating from fees.

This model is not as capital efficient, but the convenience of the 0 slippage trades makes it popular, and so profitable.

This model is also limited by the size of Liquidity Pool.

An important parameter in this model are the Pool Assets' ratios. You want to maximise trading volume and so provide as much volatile assets, but you also need to control the pool overall long exposure to such asset. Rebalancing during a market downturn is essential.

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Last updated 8 months ago

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