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NLP - Liquidity Pool

NLP is Nether.Fi's liquidity provider token.
NLP consists of an index of assets used for swaps and leverage trading. It can be minted using any index asset and burnt to redeem any index asset. The price for minting and redemption is calculated based on (total worth of assets in index including profits and losses of open positions) / (NLP supply)
Holders of NLP token earn Escrowed NFI tokens and 70% of platform's generated fees. The fees are distributed in ETH. Note that the fees distributed are based on the number after deducting referral rewards and the network costs of keepers, keeper costs are usually around 1% of the total fees.
Staked NLP token address: URL
As NLP holders provide liquidity for leverage trading, they will make a profit when leverage traders make a loss and vice versa. Past PnL data, NLP price chart and other stats can be viewed on URL.

Minting and Redeeming

Minting NLP

  1. 1.
    Bridge or buy any of the NLP index assets to BASE. The list of tokens can be found on the Dashboard.
  • Fees will be lower for tokens that the pool has less of, check the "Save on Fees" URL section to get the lowest fees
  • You should buy the token with the lowest fees from Ethereum and then bridge that token directly as these tokens are likely more expensive to purchase on BASE
  1. 2.
    Type in the amount of NLP you would like to purchase on: https://nether.fi/#/buy_nlp
Fees for buying NLP will vary based on which assets the index has less or more of, the Buy NLP page will show which assets have the lowest fee.
After buying your tokens will automatically be staked and you will start earning Escrowed NFI and ETH rewards, you can check your rewards at https://nether.fi/#/earn.

Redeeming NLP

Type in the amount of NLP you'd like to redeem at https://nether.fi/#/buy_nlp#redeem

Token Pricing

There may be a spread on some tokens, minting NLP will be based on the lower value of the token and redeeming NLP will be based on the higher value of the token.
For stablecoin tokens, the spread will be from the Chainlink price of the stablecoin to 1 USD.
The price of NLP will depend on the spread of the tokens in the pool as well.

Vault Index Assets

Our initial plan was to include BTC at launch, however, the official version of WBTC is not available on Base network as of our launch date. Therefore, in order to meet the promised deadline and after careful consideration, we have decided to not include BTC as one of the index assets.
However, we will add BTC as an index asset the moment it becomes available to be bridged on Base network. When that happens, its target weight will be 25% and ETH weight will be reduced to 25%, keeping a 1:1 ratio of stable and volatile assets.

Vault composition at launch

In order to bootstrap the vault TVL at launch, the team will provide $50,000 worth of liquidity, divided among index assets based on their respective weights.
Asset
Weight
ETH
50%
USDC
40%
DAI
10%

Rebalancing

The fees to mint NLP, burn NLP or to perform swaps will vary based on whether the action improves the balance of assets or reduces it. For example, if the index has a large percentage of ETH and a small percentage of USDC, actions which further increase the amount of ETH the index has will have a high fee while actions which reduces the amount of ETH the index has will have a low fee.
The token weights can be seen on the Dashboard.
Token weights are adjusted to help hedge NLP holders based on the open positions of traders. For example, if a lot of traders are long ETH, then ETH would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to stablecoins.
If token prices are increasing, then the price of NLP will increase as well, even if a lot of traders have 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, and if prices decrease, the losses of traders will keep the USD value of the reserve portion the same.
If a lot of traders are short and larger weights are given to stablecoins, then NLP holders would have a synthetic exposure to the tokens being shorted, e.g. if ETH is being shorted then the price of NLP will decrease if the price of ETH decreases, if the price of ETH increases then the price of NLP will increase from the losses of the short positions.

Risks

Caution should be exercised when interacting with any smart contract or blockchain application. While risks are attempted to be mitigated through testing, audits and bug bounties, there is always a risk of vulnerabilities in smart contract code.
For details of contract operation please read the Contracts section.
A non-exhaustive list of some risks:
  • Smart contract risks
  • Counterparty risks: The NLP pool is the counterparty to traders, if traders make a profit that comes from the value of the NLP pool
  • Token risks: Bridged tokens may depend on the security of the bridge, pegged tokens have risks of depegging