What is XLP

XLP represents Xena's dedicated liquidity provider token.

Overview

The XLP represents a composite of assets utilized for both swaps and leverage trading on the Xena platform. Users have the flexibility to mint XLP using any asset from the index and similarly, can burn XLP to reclaim any index asset. The price for both minting and redemption is calculated using a simple formula: the total value of the assets in the index, adjusted for the profits and losses of open positions, divided by the existing XLP supply.

More on how to obtain XLP

Token Pricing

There's a potential for spreads on certain tokens. When minting XLP, it's calculated using the token's lower value, whereas for redemption, the higher token value is considered.

For stablecoin tokens, the spread is determined between the Chainlink oracles' price of the stablecoin and the standard 1 USD mark.

It's noteworthy to mention that the overall XLP price is also influenced by the spread of the tokens present in the pool.

Rebalancing

The fees associated with minting or burning XLP, as well as performing swaps, will differ. They are contingent on whether the action balances or destabilizes the assets. For instance, if the index has a dominant share of ETH and a minimal share of USDC, increasing the ETH proportion will incur a higher fee. In contrast, reducing the ETH composition will cost less.

Current token weights can be conveniently viewed on our Dashboard.

Token weights are dynamically modified to safeguard XLP holders, factoring in the open trading positions. For example, if a majority of traders go long on ETH, it'll command a higher token weight. Conversely, if most are short, stablecoins will receive a more substantial weight.

When token prices rise, the XLP price ascends too. Even if many traders hold a long position, the part allocated for these positions remains relatively stable in USD value. Here's why: When prices soar, the profits from the reserved segment compensate the traders. Should prices slump, traders' losses stabilize the USD value of the reserved fraction.

if numerous traders opt for short positions with higher weights leaning toward stablecoins, XLP holders essentially gain synthetic exposure to the tokens being shorted. For instance, if ETH is predominantly shorted and its price dips, the XLP price will follow suit. But if ETH's price shoots up, the XLP price will see a surge, reflecting the losses from the short positions.

Risks

Engaging with any smart contract or blockchain application requires due diligence. At Xena, we've made considerable efforts to reduce risks—through extensive testing, audits and bug bounties.

For an in-depth understanding of risks please refer to Platform Risks section.