Simplified Explanation of Potions

What is Potions?

Potions is a platform that helps you take advantage of crypto price swings through volatility farming.

How It Works

1. Potions:

   • Potions are special tokens you create by wrapping your asset (e.g., YEL becomes lYEL).

   • Wrapping into a Potion with one asset is Single Staking.

   • You can unwrap them anytime to get your original asset back, though a small fee is collected.

2. Take Advantage:

   • When the price of your derivative and the original asset differs, arbitrageurs take advantage of it.

   • To create more opportunities for arbitrage, users provide liquidity to a Potion. This is why the LP staking strategy exists, allowing users to benefit from wrapping, buying, or selling Potions.

   • Arbitrageurs balance the prices, and small fees are collected to benefit Single Staking, LP staking, or both.

   Three Ways to Benefit from Potions

   1. Single Staking.

   2. LP Staking.

   3. Arbitrage Hunting.

Single Staking

Simply wrap your asset (e.g., YEL) into a Potion to receive a derivative token (e.g., lYEL).

To calculate how much your asset has increased from staking, multiply the derivative token (e.g., lYEL) by the Backing Ratio and subtract the Unwrap Fee.

For example, consider John Doe, who notices that lYEL offers an attractive APR. John starts with 100,000 YEL and decides to wrap his YEL into lYEL. After wrapping, he receives 98,500 lYEL . At the beginning, the Potion's Backing Ratio for YEL is 1.

As more users join, the Backing Ratio rises to 1.0592. This means John’s gains are calculated as follows:

(98,500 - 0.25% unwrap fee) × 1.0592 = 104,070 YEL

In total, John gains approximately 4,070 YEL just by holding lYEL.

This image represents the YEL Potion, showcasing its key details and metrics, such as the Backing Ratio, Wrap/Unwrap fee and APR.

For example, consider the YEL Potion. In the top-right section, you can see the TVL (Total Value Locked) of users who have wrapped into lYEL, which currently shows $50,465.196. The Backing Ratio can be found on the second line of the Details section, while the Wrap/Unwrap fee is located at the bottom of the Potion page.

To check the Backing Ratio or the Wrap/Unwrap fee, navigate to the specific Potion you wish to interact with.

This strategy does not generate pending rewards, all rewards are realized upon unwrapping.

LP Staking

Wrap your YEL into a potion, receive an lYEL, use lYEL and a paired token to create LP, and stake it.

Meet John Doe, an experienced user who enjoys providing liquidity to earn profits. John decides to engage with a Potion by wrapping his YEL, converting it into lYEL. He then creates a Liquidity Pair using the lYEL he received and a relevant paired token in this case lUSDC.

By wrapping his YEL, John immediately starts earning the Holders APR , which rewards him for simply holding lYEL. In addition to this, he also earns the LP APR, which comes from the fees generated when other users interact with the Potion through actions like wrapping, buying or selling Potion.

By holding lYEL and staking slYEL, John earns rewards from both APRs.

For example, consider the YEL Potion. In the top-right section, you can see the LP TVL of users who have staked slYEL, which is currently $7,412.265. The Total Rewards that Potion generated are displayed in the Details section and, as shown in the image, amount to 185,670 YEL.

To check the next distribution, look above the fees on the left side of the Potion page. The distribution is represented by a scale that fills up as fees are collected. In this case, the next distribution will occur once the Potion collects 945 YEL from fees.

To claim the distributed fees from staking slYEL, navigate to the Dashboard section.

In the Dashboard, you can claim all fees at once by clicking the "Claim All" button under Total Pending Rewards. Alternatively, you can claim fees for each vault separately by using the "Claim" button next to the specific vault.