Risk Management for Liquidity Providers

Risk management is a fundamental pillar of the Xena Finance ecosystem. As such, it is crucial to develop an inventive design centered around risk management for liquidity providers.

Disclaimer: Xena is kicking off with a singular XLP pool. As our platform gains popularity, we have outlined the strategy for how we plan to expand and divide the XLPs into three separate sections, based on the RMLP system used in traditional markets. This evolution is not merely a scaling-up, but a conscious effort to empower our users. It grants them the autonomy to tailor their investment strategies according to their individual risk tolerance levels.

Drawing from traditional markets, Xena Finance has adapted a creditor structure that offers multiple levels of risk for digital asset pools. Built from the ground up, the Risk Management & LP Seniority on the Credit Table (RMLP) system divides liquidity pools into Tranches, each having varying risk profiles for liquidity providers.

These Tranches represent the underlying exposure of Xena Liquidity Providers (XLPs) to the assets within each pool, as well as to the PnL of traders on the platform.

The RMLP system is designed to:

Segregate risk exposure to the underlying assets in Tranches by assigning higher-risk assets to specific pools
 Address operational challenges inherent to zero-price impact perpetuals such as long-tail risk by concentrating risk exposure on liquidity providers with a higher risk tolerance Access Xena Liquidity here.

Find more information on available Tranche pools (XLP)