Introducing Spot Pools - Earn Fees & Utilize Your LP Position as Margin
Gone are the days of deciding between being a DeFi yield farmer or trader. With the introduction of Pools you can eat your cake and have it too!
Provide liquidity, earn fees, and utilize LP positions as margin, unlocking the potential to farm yield while trading, all on one vertically integrated app.
In our previous blog post, we explained how Vertex's hybrid orderbook-AMM design offers a unique trading experience like none other. The CLOB ensures fast and scalable trading comparable to leading CEXs, with near-zero latency and no MEV/frontrunning issues. The inclusive nature of the AMM allows anyone to participate in market-making, providing traders and makers with improved execution due to distributed liquidity. Together, these features create a unified source of liquidity, enabling Vertex to scale beyond DeFi limits.
Great! But what can I do now that pools are launched?
The Details
Vertex will add spot pools to its interface, where users can select a pool and provide liquidity.
Providing liquidity will require depositing both of the pool’s assets (i.e. wETH & USDC). There is no single-sided liquidity providing.
After providing the liquidity, you will receive minted LP tokens representing your share of the pool. You will be able to track the value, composition and PnL of your position in the Portfolio section of the app.
LP Positions (tokens) will contribute to your account's health and can be used as margin for trading and borrowing
How LP Positions Impact Health
In Vertex's universal cross-margin system, every balance, perpetual position, and now LP position affects your margin. It either adds to it or consumes it. However, the impact is not based solely on face value due to market volatility. Instead, each item is assigned two weights: initial and maintenance.
- The sum of the initial values represents your available margin, which is the funds you can use to initiate positions.
- The sum of the maintenance values represents your maintenance margin, which is the amount of funds you must maintain. If this reaches zero, your account can be liquidated.
Initial weights are lower than maintenance weights to give your account a buffer between the ability to take on new risk and get liquidated.
Deposited assets and positive PnL contribute to your available and maintenance margin, while borrows, perpetual positions, and negative PnL consume your available and maintenance margin.
LP Positions function similarly to deposited assets as they contribute to your margin value.
Let's take an example of an ETH-USDC LP Position. The LP position can be broken down into balances of ETH and USDC. Each balance is assigned an initial and maintenance weighted value that impacts your account's margin.
However, the underlying balances of LP Positions are given slightly more conservative weighting due to the fluctuating nature of pools. We will provide the exact health parameters and weights in the coming weeks.
How to Create an LP Position
1) Navigate to the new pools page
2) Press Provide on the pool you wish to LP into
3) A provide liquidity modal will appear. Enter the amount you wish to provide of either asset and the other will populate automatically. Or use the shortcut buttons to provide a % of your max LP Position.
4) After creating an LP position, you will be able to view & manage it in the portfolio overview and Pools Subpage. Your position breakdown will include the balance of underlying assets (i.e. amount of both ETH and USDC) and your PnL since opening the position.
5) To withdraw liquidity - simply press the withdraw button in the LP position row. A modal will open. Enter the amount of LP tokens or % of your position you would like to withdraw.