Hi folks,
I am leading the Baklava project, an auto-compounding/synthetic asset defi project on the Avalanche network.
Baklava will be creating synthetic assets and is looking for exchanges to hedge these positions. For this purpose, we would like to explore tapping into FxDex’s liquidity.
I have recently connected the Function X team with the Litecoin foundation team to be Function X’s public validator, and that was a win-win collab for both. Hence, taking this opportunity to explore other collaborations with the Function X team.
Baklava aims to attract LP for auto-compounding as a first step. In the next phase, using these LPs as collateral, Baklava protocol will further allow users the option to borrow against their LP collateral to mint synthetic assets, e.g. synthetic TSLA shares.
To hedge this open position risk, Baklava protocol will buy an equal amount of TSLA position in FxDex. Hence, the protocol needs to tap into the assets and the liquidity that FxDex offers. We can only allow users to mint the assets that we can square off in FxDex.
When users want to close their positions, they will need to burn their synthetic assets using the Baklava platform. The net gain/loss from their synthetic position will be computed then. If its a loss, the value of their collateralised LP will be used to net off against the losses. I.e they will get back less LP than they put in. If its a gain, they get back their original LP plus whatever net gains they have from the synthetic asset price gain.
Users will pay a fee (in Bava) to mint or burn their synthetic assets.
Great to see you in the forum @kenvass, firstly thanks for setting us up with Litecoin Foundation! Our public validator cohorts are thrilled to have Litecoin amongst us. Litecoin Foundation is one of the most humble team I know, despite the successes you had.
Congratulations on Baklava platform launch, and happy to work with you to tap onto f(x)Dex liquidity aka Variable. How’s your experience using f(x)Dex so far, and is there special need that we can help?
Hey @kenvass , it is actually very interesting imo.
Let me clarify some points,
Does it mean when user opens position on Baklava (or in your case, mint the synthetic asset), you will open the same position on FX DEX?
How many exchanges are you planning to work with? I am wondering, because there are only a few platforms that have similar solution as FX DEX (except the on-chain perp trading, i never seen any platform offered this before).
In this case (lack of platform competitor), do you plan to hedge 100% of your position to FX DEX?
yes, we will open the same position in FxDex when users mint (long) or burn (close) synthetic asset. It will be good we we can interact with Variable via API, so as to pass our positions to Variable immediately.
2/3. It depends on whether the liquidity in the exchange is sufficient. For a start we are planning to work with one exchange to easier manage the process.
In terms of requirements, we want to ensure that the FxDex market price gap with the Oracle price is narrow. Our users will see the asset value based on Oracle price feed. When they enter into a position to mint or burn, the actual executed price in FxDex should not defer by too high a percent. Is FxDex able to maintain consistently narrow price gap? Based on the testnet, it seems so.
We are looking at a collateral ratio of 200%, that is, the collateral value must be 2 times that of the amount granted to mint synthetic assets. e.g. if users put in LP valued at $1,000, he can get a $500 credit to mint synthetic assets.
If the LP value drops such that collateral ratio goes below 200%, the user have to either top up more assets (in LP) or the platform will liquidate some of the collateralised LP, so that the ratio goes back above 200%.
To prevent liquidation, users will probably need maintain a higher collateral buffer such that their total collateral value should be maintained higher than 200% - to absorb any price shocks that will trigger the collateral liquidation.
Thanks for the headsup! @kenvass@Keith Nice to e-meet you! @BlueStitch will attend the conference. You guys can schedule a meeting there. Look forward to a fruitful discussion.
Great to meet the team from FX at the Avax summit! Happy to discuss in details how to collaborate with FX team on using Fxdex and offering Baklava space functionality on FX. network.
Hi Keith, it was my pleasure to meet you and hear more about your project as well as your plans to utilize FXDEX.
This month, we will have our all-hands meeting where we discuss live on Zoom the process of Function X together with the community. I feel that it would be a great idea for you to join and talk more about the Baklava project. I am sure our community will be interested to hear more about it. What do you think?
Feb 18, 1pm UTC / 6:30pm IST