MarginX 2.0 FAQ
MarginX 2.0 related
What is MarginX ALO (Automated Limit Order Book Market Maker)?
MarginX ALO is a product built on the Coast and MarginX platforms, enabling users to participate in liquidity mining using Liquidity Pool (LP) tokens. Similar to GMX's liquidity pool, users can provide liquidity by depositing their LP tokens as market makers for MarginX, allowing them to earn market-making profits and a share of trading fees.
What distinguishes MarginX ALO from GMX?
MarginX ALO offers lower entry barriers and higher efficiency compared to GMX. While GMX supports only mainstream cryptocurrencies like ETH, BTC, and UNI for liquidity provision, requiring users to hold these tokens, MarginX ALO allows users to utilize LP tokens generated from adding liquidity on platforms like Uniswap v2, Pancakeswap, and Osmosis. In essence, you can initially add liquidity to pools on platforms like Uniswap, earning platform trading fee rewards. Subsequently, you can deposit these LP tokens into MarginX ALO to earn market-making profits and rewards within the $FX ecosystem.
How do I use MarginX ALO? To create a new liquidity pool, you provide liquidity with LP tokens to earn rewards.
How does MarginX ALO work and utilize my LP tokens? MarginX ALO employs a Perpetual Automated Limit Orderbook (ALO) methodology, applying Automated Market Maker (AMM) principles to Limit Order Book (LOB) exchanges. In practical terms, it consists of smart contracts that establish a standard way to create liquidity pools, add liquidity using LP tokens, and manage your LP token vaults. You can deposit your LP tokens into any liquidity pool. MarginX ALO will collateralize your LP tokens on Coast, borrow CUSD, and allocate them to MarginX's market-making pool. A predefined strategy manages the funds, and profits are settled daily at UTC+00:00.
What distinguishes these four strategies? MarginX ALO currently offers liquidity provision strategies influenced by two factors: Price Range (0.008 & 0.020) and Capital Allocation Ratio (additional parameter = 0.0010 & 0.0005), resulting in four distinct strategies. Price Range refers to the spread in the order book for market-making funds anchored to the oracle price. A smaller range leads to more easily executable orders and higher fee rewards, as traders prefer trading near the oracle price. Capital Allocation Ratio defines the minimum percentage of liquidity funds distributed across price range extremes, enhancing market-making fund allocation curves.
How can I create new liquidity pools?
Creating a new liquidity pool in MarginX ALO also involves creating a corresponding perpetual contract trading pair within MarginX. Therefore, you need a price source for the trading pair. Presently, MarginX ALO's price oracle supports the top 100 projects on CoinMarketCap. Users are free to create liquidity pools for these projects at any time. If the liquidity pool you wish to create lacks a price source, please provide feedback on the forum. We will update the price oracle based on community governance results to ensure the necessary conditions for trading pair creation.
How can I remove liquidity?
Users can initiate liquidity removal requests at any time. However, the process from request initiation to profit settlement takes 72 hours. In other words, you will receive your trading profit/loss after 72 hours. The estimated profit shown upon initiating a liquidity removal request is subject to change due to the high volatility of the trading market. The final settled amount is accurate. If the liquidity provision was profitable, users receive their LP tokens and earn CUSD. If the liquidity provision incurred losses, you'll need to deposit the loss amount in CUSD to retrieve your LP tokens.
Token related
Which LP tokens are supported by MarginX ALO? Currently, MarginX ALO supports only $FX and ATOM/OSMO LP tokens. We plan to introduce more available LP tokens based on user feedback and suggestions.
What is CUSD? CUSD is a stablecoin issued within the FunctionX ecosystem, pegged to the US Dollar. Similar tokens include USDC, USDT, and DAI. In both MarginX ALO and MarginX, perpetual contract trading pairs are denominated in CUSD. Rewards for profitable market-making strategies are distributed in the form of CUSD.
How can I acquire CUSD?
You can obtain CUSD through various methods, including purchasing directly from FxSwap, participating in lending on Coast, or adding liquidity in MarginX ALO to earn market-making rewards.
How can I use CUSD? You can utilize your CUSD to participate in various projects within the FunctionX ecosystem, such as trading directly on MarginX.
Is it safe to engage with MarginX ALO?
To ensure the security of MarginX ALO and safeguard users' funds, we take the following measures: i. All code is open-sourced and continuously reviewed. ii. Decisions regarding governance and risk management are managed through a DAO (Decentralized Autonomous Organization) structure.
Risk Warning
What are the risks of adding liquidity to MarginX ALO?
There are several potential risks associated with adding liquidity to MarginX ALO: i. Smart Contract Security: Possibility of smart contract vulnerabilities or bugs within MarginX ALO. To mitigate this risk, the MarginX ALO code is open-source, audited, and subject to an extensive bug bounty program. ii. Impermanent Loss: Similar to the potential impermanent loss when adding liquidity on platforms like Uniswap or GMX. Trading is a zero-sum game, where liquidity providers may experience losses while traders profit. MarginX ALO aims to optimize market-making strategies and utilize hedging mechanisms to mitigate this risk. Nevertheless, the risk remains, and it's important to be aware of it. iii. Liquidation Risk: Due to LP Token Price Fluctuations. Fluctuations in the price of your LP tokens could lead to a decrease in the collateralization ratio within Coast. In extreme cases, there's a possibility of liquidation of your LP tokens if the collateralization ratio falls below Coast's liquidation threshold.
What about the APR of MarginX ALO? After providing liquidity to MarginX ALO, the user's earnings calculation formula is: Total Earnings = (Market Making Profit/Loss - Borrowing Interest + Trading Fee Shares). Market-making profits and trading fee shares will be settled in $CUSD.
What fee is applied by MarginX ALO? What is this used for?
As MarginX ALO is built on the Coast platform, users are required to pay interest on borrowing within Coast. This fee is calculated per block, and regardless of whether your market-making activities generate profits, the interest accrued from borrowing must be repaid.
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