The Fundamentals of the Leverage Token ($LEV)
Hello everyone! The team building the Leverage token has written this article to serve as the ultimate introduction for newcomers of the project and its community, where the fundamentals/utility of the token and our products to be offered will be described thoroughly.
Before we dive in, the team would like to formally introduce ourselves with a brief rundown of our experience in the cryptocurrency industry, and offer details on what exactly we are trying to achieve with the Leverage ecosystem. The founders and team members of Leverage consists of four developers, who have extensive experience in a handful of different programming languages and other related areas of study. Several members working on the ecosystem previously worked on a successful token on the Ethereum blockchain, but have shifted their efforts and focus to the development of $LEV, which we believe will change the way ERC20s are traded forever.
Transparency, utility, and security.
For obvious reasons that will be alluded to further into this article (security section), the team has come to the conclusion that remaining anonymous is in the best interest of all parties involved for the sake of decentralization and privacy, which will prove to be key factors determining the success of the token.
To instill the trust of our investors from the first day of launch and onward, all of the tokens owned by the team will be vested for 12 months, which will then slowly be released monthly for a year (more on token economics later in this article).
So, What Is Leverage?
To put things simply, Leverage is an innovative project on the Ethereum network that will offer the ability to trade a handful of different cryptocurrencies with up to 100x leverage straight from your Ethereum wallet. All trades that go through our protocol will utilize the Leverage token’s very own automated market maker built in our decentralized exchange (similar to Uniswap), and you will never be asked for personal information when making trades. The exchange does not have a central authority figure, and everything on our protocol will be hosted on IPFS, a decentralized content network.
This allows for the smart contracts in our protocol to be truly immutable and incorruptible, forever at the hands of anyone who wishes to use it.
At first, the platform will offer margin trading of solely Bitcoin and Ethereum, with the options gradually expanding to support trading of other cryptocurrencies to be voted on and approved by holders of the Leverage token in the future.
Such an idea opens up the opportunity for a variety for other possibilities including but not limited to the support of trading for BTC/ETH/DAI against synthetic markets (not leveraged), or implementing lending/borrowing protocols for use in different fields of decentralized finance. Synthetics assets will range from gold all the way to various stocks on the DOW Jones.
Smart contracts and on-chain oracles will maintain the protocol to ensure that everything is working properly, all the while negating the effects of potentially bad actors who are attracted to such an ecosystem. After all, security is of the highest priority of the team, and it will continue to be of utmost importance throughout development.
The Leverage Token ($LEV)
As the native currency of the leverage ecosystem, holders of the token will be able to take advantage of the unique aspects of our protocol that it was specifically designed to compliment. $LEV is arguably the most important concept in the entirety of the project, as it will be used for governance, liquidity, and serve as the backbone for the automated market maker, which will eventually expand from perpetual swaps to synthetic markets.
Users will have the ability to stake their tokens for a default period of thirty days, and earn rewards in an amount that is proportional to their percentage of holdings in the staking pool.
Additionally, Leverage can be farmed with a variety of tokens including LINK, ETH, UNI, WBTC, or LEV-WETH UNISWAP LP tokens. Payouts will be dependent on how many tokens there are locked, as well as the amounts you are farming with. There is no lock up period set for farming, but interest rates will be lower than that of the rates paid out to those who are staking.
For holders who wish to experiment more with the protocol and its products, an option to provide liquidity in the leverage liquidity pool (LLP) will be available, where rewards are dependent on the liquidations of traders who utilize the protocol. In the event that a traders position suddenly becomes worth less than the initial collateral deposited, a smart contract will automatically close the position and distribute the funds to liquidity providers in the leverage liquidity pool.
Token Economics
One of the many things that were taken into careful consideration the past few months, is the token economics of $LEV. The fundamentals work together to reward holders and participants of the ecosystem while maintaining inflation to levels where the price of the token will be virtually unaffected. This involves several deflationary mechanisms implemented to counteract inflation that is paid out to stakers, traders, farmers, team members, and the leverage liquidity pool. A total of 100 $LEV will be minted every week, distributed as follows:
- 40 $LEV distributed to the leverage liquidity pool (LLP)
- 10 $LEV distributed to farmers
- 20 $LEV distributed to stakers
- 20 $LEV distributed to wallets with the highest trading volume in the protocol
- 10 $LEV distributed to team members
Those who wish to use the platform for perpetual swaps and trading synthetics with our decentralized exchange will also be required to hold a minimum of 10 $LEV tokens (subject to change).
Inflation
Tokens that are minted will play a crucial role in the development of the token and its success. However, it is important to keep in mind that the token will take many years to ever reach its maximum supply, and ideally it will never reach the number when accounting for the implied burns.
Through slow and timely control of inflation, the Leverage ecosystem will be able to reward participants of the project in a way that minimally affects the tokens already in existence. Every week, 100 $LEV tokens will automatically be sent to farmers, stakers, liquidity providers, traders, and members of the team.
- Only 100 $LEV is minted every week, to be distributed to those who provide value to the project
Deflation
Several deflationary mechanisms were specifically instantiated to protect the token against inflation. This involves buy backs and burns with the leverage liquidity pool, and fees obtained by swaps from the automated market maker. Any excess of funds that are gathered from the liquidity pool will automatically be used to buy back $LEV from the market and burn it. Furthermore, a total of 0.01% of all trades through the automated market maker will be taken in the form of fees to burn $LEV.
- 0.01% of all trades on the decentralized exchange will be used to buy back and burn $LEV tokens
- Excess funds obtained by the leverage liquidity pool will automatically be used to buy back and burn $LEV tokens
Overview
A total of 72,500 tokens will be placed for sale on bounce finance for a period of two weeks at a price of 25 $LEV per Ethereum (date will be announced in the near future). Additionally, a small private sale amounting to 5,000 (30 $LEV per Ethereum) will be generated from private investors for marketing purposes beforehand. All tokens that are not sold during the public sale will be burned, and the amounts that are listed below assume that all tokens are sold, which may be subject to change proportionally.
Max Supply: 10,000,000 $LEV
Initial Circulating Supply: 91,875 $LEV
Public Sale: 72,500 LEV
Team Tokens: 7,500 $LEV (75% vested for one year, then released monthly for a period of 12 months)
Marketing: 5,000 $LEV
Liquidity Allocation: 12,500 LEV + 568.18 ETH (listing at 22$LEV per ETH)
How does the protocol work?
Lending:
As a user who provides value to the leverage liquidity pool (LLP), you are entitled to all liquidations suffered by traders in our protocol.
Since the interest rates will be determined by the success of traders within the market, it is impossible to predict specific payouts until it is live, but profits will be secured through weekly payouts.
When a user opens a trade, they must provide a sufficient amount of capital to the pool held in a smart contract, and the protocols funds will be secured by the weekly distribution of tokens that are minted. The positions are synthetic in the sense that they only exist when a trade is closed.
For example: if a user opens a position of $1,000 DAI with x10 leverage, the profit/loss will not be taken from the pool until the trade is closed.
In the instance that a single trade makes up a significant amount of tokens in the pool, weekly payouts to traders and the team will be adjusted accordingly, thus protecting the funds of liquidity providers.
Under our calculations, the team believes it is likely that lending to the leverage liquidity pool will have the highest payouts when compared to staking or farming tokens.
Borrowing:
For users who wish to utilize the protocol for trading with up to 100x leverage, you will first be required to deposit a proportional amount of collateral to your margin account (accepts wBTC, ETH, or DAI).
For example: If you wish to long BTC with 10x leverage equaling $1000 worth of buying power, you will need to deposit $100 in the form of collateral in order to open the trade.
In the event that your deposited collateral becomes insufficient to cover losses obtained during one of your trades, a smart contract will automatically close your open position (liquidate) and distribute the collateral to the leverage liquidity pool.
If you’re close to reaching your liquidation price, you may always deposit more funds to secure your position.
User Interface:
Ideally, the user interface will look somewhat similar to Uniswap for the automated market maker, as we believe the simplicity of the layout is what attracts the majority of users to trade within their exchange. However, since we intend to implement ideas much more complex than the typical decentralized exchange, simplicity will be sacrificed in some areas for maximum functionality.
For margin trading, a chart with various tools for indicators along with an easy to access system providing details on your current positions, liquidation price, and more will be present.
For trading without leverage on synthetic markets, options to create a new synthetic, provide liquidity, and trade will be available for use at a later date.
Governance
For votes in the Leverage ecosystem, one must first be holding a $LEV token, which can then the used to vote on proposals from the community. Ideally, users will vote on how funds from the leverage liquidity pools are used and/or distributed, parameters of the ecosystem, and the addition of assets available for trade in the protocol.
- $LEV is voting power within the DAO
- A fee in $LEV (TBD) will be required to make a proposal
- 1 $LEV = 1 VOTE
The Automated Market Maker
A decentralized exchange similar to Uniswap will be built inside of the Leverage tokens ecosystem. This differs from the typical order book model seen on the NASDAQ, where buyers and sellers are constantly required to determine an ultimatum on the price of the selected asset. Instead of the standard order book model, the decentralized exchange within Leverage will run off a liquidity pool.
What does this mean?
Rather than requiring market makers, a liquidity pool will be introduced with a given asset at a price initially determined by the user. One must first provide liquidity of the asset with a proportional amount of $LEV, and the price of the token/synth will then be determined by traders themselves, free to trade and place a “bid” at any moment in time.
The order book model is inconvenient and requires users to constantly “make the market”. We find this approach unnecessary, lacking the simplicity and ease of use for traders, therefore the exchange is based on a liquidity pool in which the market is automatically “made”.
Synthetic Markets
This is where things within the span of the Leverage ecosystem will get more complex. Synthetics markets range from almost any opportunity a user can think of, whether it be the ability to trade BTC, ETH, or DAI against various markets that are maintained by external price feeds on-chain. This process will be described further in the whitepaper and in medium articles to come, and we are very excited to share these details with you.
Through the leverage platform, users will be able to trade BTC/ETH/DAI against precious metals, stocks on the DOW Jones, binary options, or other cryptocurrency assets.
With such a platform, Leverage intends to provide an all-in-one trading system allowing for users to trade almost anything imaginable straight from their Ethereum wallet, without having to go through rigorous KYC procedures like many existing exchanges require.
Security
As mentioned earlier, security is of the highest priority to the team, and with potentially millions of dollars in our ecosystem, we will do everything in our power to protect the funds of users.
With our services fully audited, we believe the protocol that has been built inside of Leverage will offer the best of security for users and their funds.
Profit Correction
One particular vulnerability on our platform, is the trader with insider information, who could theoretically make a trade with particular information and make substantial profits, essentially draining the liquidity in the pool. Because Leverage is fully decentralized, there will be no way to stop such trades from happening, so we came to the conclusion of implementing a way of protecting liquidity providers if such a circumstance is needed.
This will be done through a smart contract, which is only activated when the liquidity of the leverage pool drawbacks more than 10% on a given day. If activated, the smart contract will universally limit profits obtained by traders on the protocol, socializing all trades and their winnings to an amount necessary to maintain liquidity within the leverage liquidity pool.
For example: an informed trader makes a profit of $105,000, when the leverage liquidity pool holds $1M worth of liquidity. Because the profit is greater than the 10% allowed drawback of the liquidity pool on a given day, a trader who profits $1050 will see their profits socialized on their balance ending in $1000 profit, with the excess of funds being distributed back to the leverage liquidity pool.
Security Laws
As many of you reading may already know, security laws of the United States are quite complex, and often hinder the ability of exchanges to run in a fully decentralized manner due to tedious methods of moderation and compliance procedures.
Since this would go directly against the core focus of Leverage, the team will remain anonymous with protocols running on IPFS, leaving the ecosystem 100% decentralized and immutable (cannot be taken down).
Decentralized finance is a whole new era of finance, and Leverage intends to be a pioneer in the discussed field of neglected market potential, by offering ease of trading with any asset desired for everyone.
Public Sale:
There are no specific date set for the public sale of $LEV, but we intend to launch within the next few weeks! A total of 72,500 $LEV tokens will be put up for sale on the Bounce Finance platform for a period of two weeks, at a price of 25 $LEV per ETH. Listing will commence immediately after, at a price of 22 $LEV per ETH. All unsold tokens from the public sale will be burned, and token economics will be adjusted accordingly.
Keep an eye on our social channels to stay up to date and get more information regarding the upcoming token sale!
Roadmap
The first product to be released by the team will be the perpetual swap platform, allowing for users to trade with up to x100 leverage straight from their Ethereum wallet. First, the platform will be available only on test-net, where various bugs and fixes will be thoroughly developed and worked on. After any necessary changes are made, several audits will be conducted and the release will be announced following successful results. Below you can see a brief idea of our plans for the future.
Q4 2020
- Deploy the $LEV token
- Conduct seed round
- Initiate marketing
- Conduct public sale
- Launch staking and farming for $LEV
- Deploy oracle contracts
- Release prototype of margin trading platform
- Recruit more skilled front-end developers
Q1 2021
- Release margin trading platform on test-net
- Conduct audits
- Launch leverage liquidity pool
- Deploy the margin trading platform on main-net
- Partnerships with exchanges/wallets/services
- Release prototypes of decentralized exchange
- Deploy decentralized exchange to test-net
- Audit code of the decentralized exchange
- Deploy decentralized exchange on main-net
Q2 2021
- Release synthetics platform prototype
- Deploy synthetics market to test-net
- Audit contracts of synthetics
- Deploy synthetics market to main-net
Q3 2021
- Explore lending/borrowing services in decentralized finance
- Expand ecosystem to attract more users
- Host hackathons, and other events to further adoption
- Integrations with leading DeFi services/tokens
This concludes the basic information about the $LEV token and its ecosystem. For more details, feel free to check out our whitepaper or technical paper! The team would like to thank you for your interest in the token, and we are excited to take this journey alongside our supporters!
Important Links
Website: https://leverageswap.com
Telegram: https://t.me/leveragetoken
Twitter: https://twitter.com/@leverageswap
