Platypus Finance

• open liquidity pool (single-sided liquidity) to solve limitations of other stablecoin swap protocols

  • stablecoins are being used on multiple LP pools with low captial efficiency > maximise capital efficiency as deposit are used for both liquidity & lending

  • LPs are required to have 2 stablecoins (or converted by smart contract automatically when deposit that accounts slippage) to provide liquidity > no no implement loss & slippage for LPs to provide single-sided liquidity

Asset-Liability Management (ALM)

• every stablecoin has its own account in an open liquidity pool

• each account has an asset & liability side

  • Deposit 100 USDT & 100 USDC to Platypus USDT (100 asset, 100 liability) USDC (100 asset, 100 liability)

  • Swap 20 USDT to 20 USDC USDT (80 asset, 100 liability) USDC (120 asset, 100 liability)

• use coverage ratio to maintain equilibrium states, where ratio = asset / liability

  • coverage ratio < 1, e.g. USDT 80 asset/100 liability = 0.8 is under-covered

  • coverage ratio > 1, e.g. USDC 120 asset/100 liability = 1.2 is over-covered

Dynamic Swap Slippage Fee

• to maintain equilibrium of coverage ratio sticks to 1 to ensure LPs can always withdraw what they have deposited

  • LPs: incentivise LPs to provide the more scarce asset & penalise LPs withdrawal asset that is lacking

    • when USDT with overage ratio is e.g. 80%, it's mining emissions will be reduced, motivate LPs to swap more USDT to USDC

    • when USDC with overage ratio is e.g. 120%, it's mining emissions will be increased, motivate LPs to swap more USDT to USDC

  • Traders: slippage fee is used to maintain coverage ratio

    • when using token with coverage ratio is e.g. 80% to swap for another token, slippage is -0.08%, i.e. receive 0.08% incentives for a swap

    • when using token with coverage ratio is e.g. 120% to swap for another token, slippage is 0.08%, i.e. 0.08% of the token goes to the pool

Fee to support the health of pools

• adjustable Retention Ratio to determine ratio of fee will be kept in reserve

  • >1 means 100% swapping fees are retained in the reserve of protocol

  • <1 means portion of swapping fees are distributed to LPs

• withdrawal fee is applied to penalise withdrawal arbitrage that may drain pools

  • coverage ratio >＝1 has no withdrawal fee

  • coverage ratio <1 incurs proportional withdrawal fee

  • coverage ratio <= 0.3 will turn withdrawal fee to 100%