Potions
Potions are a key component of the closed volatility farming ecosystem, enabling users to benefit from market fluctuations and generate yield through creating derivatives, providing liquidity and/or executing arbitrager opportunities. Potions leverage parallel liquidity model to create a closed ecosystem for democratized arbitrage.
How Potions work:
Creating Derivatives: Original assets (e.g., YEL) are wrapped into derivative tokens (e.g., lYEL) through the Potions ecosystem.
Parallel Liquidity Pools: A secondary liquidity pool is created with the derivative token (e.g., lYEL/USDT), existing alongside the original liquidity pool (e.g., YEL/USDT).
Price Variances: Since derivative and original assets are not directly tied, price discrepancies naturally occur between these pools, creating arbitrage opportunities.
Key Benefits of Potions:
Yield Generation: Users collect competitive yield by holding derivative tokens or providing liquidity;
Arbitrage Opportunities: Structured price variances between pools allow users to capitalize on market fluctuations;
Sustainability: The system ensures a balanced ecosystem by incentivizing all participant roles through rewards and fees;
User Flexibility: Options for simple or advanced strategies cater to both beginner and experienced users.
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