💧 KLP Pool
KLP is Kinetix's LP (Liquidity Provider) Token that helps power the Perpetual DEX.
Overview
KLP is an index of assets that is used for swaps and leverage trading on the platform. Users can mint KLP by adding any index asset to the Liquidity pool, while KLP is burned each time a user removes any index asset from the Liquidity pool.
The Benefits of providing Liquidity to the KLP Pool:
Holders earn 70% of the Fees from the Perp DEX.
KLP holders make profits from traders' losses.
Rewards
Liquidity providers receive 70% of the total fees from the Perp DEX in the form of:
wKAVA
pKAI (pKAI will soon be redeemable for KAI after TGE).
USDT
The Price of KLP is determined by the different assets in the KLP basket, which is composed of:
BTC
ETH
USDT
KAVA
ATOM
The KLP token is designed to supply the liquidity required for leverage trading. Therefore, KLP holders are the liquidity suppliers and they profit when leverage traders make losing trades. On the other hand, they lose money when leverage traders make profitable trades.
Adding or Withdrawing Liquidity
Then, click on "Add Liquidity" to mint KLP or "Withdraw Liquidity" to redeem KLP
On the left-hand side of the page, you will see a recap of all $KLP information such as:
Price
Your Wallet
APR %
Total KLP supply
Supposing you would like to add liquidity, you can choose any index asset to add liquidity, by using either the drop-down button in Zone 1, or by using any of the orange buttons (+Liquidity with X Asset) in Zone 2.
Having chosen the desired asset to provide liquidity with, enter an amount in order to see the fees required in Zone 3:
The price for minting and redeeming is calculated based on the total value of assets in the index, including the profits and losses of opened positions divided by the KLP supply.
Being able to provide or redeem the assets that are the most, or less sought after by the protocol, will allow you to lower your fees.
Note that providing liquidity (minting KLP) immediately starts accruing rewards.
Rebalancing
The fees to mint or redeem KLP can vary based on whether the action is aligned with the protocol’s needs at that time or not.
Token weights are adjusted to help hedge KLP holders, based on the open positions of traders.
As an example, if a lot of traders are longing for the asset ETH, then ETH would have a higher token weight. However, if many traders are shorting, then a higher token weight will be given to Stable-coins.
If the prices of tokens are increasing, then the price of KLP will increase as well, even if a lot of traders have opened 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. On the other side, if prices are decreasing, the losses of traders will keep the USD value of the reserved portion the same.
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