Liquidity Pool Structure
Aark Digital's Liquidity Pool is quoted in USDC.
LPs can open their positions, indicating their share of the total liquidity in the pool rather than directly providing their assets into the pool.
To open a position, each LP must deposit assets as collateral. If the value of an LP's account falls below its maintenance margin (calculated from the weighted value of assets), the position will be liquidated.
The value of LP’s account in Aark Digital is affected by two main factors:
1) Profit and loss (PnL) generated from traders who use the liquidity pool for trading
2) Fees such as trading fees and funding fees
When traders lose (negative PnL and fees): the size of the liquidity pool expands, which ultimately leads to an increase in the USD balance of LPs.
When traders win (positive PnL): the liquidity pool must pay out profits to traders in USD. This results in an increase in the USD balance of traders and a decrease in the USD balance of LPs (in the event of a loss that exceeds the positive USD balance, the balance could become negative).
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