Decentralized leveraged tokens. They're a simple way to get leveraged exposure to a variety of tokens without risk of liquidation.
Who owns the Cube token protocol?
The Cube token protocol, much like Charm itself, will be owned by the Charm community. Charm tokens (TBC) will allow community members to vote on governance matters related to the Cube token protocol.
Your level of leverage won't be exactly 3x - it can vary a lot and could easily be 1.5x or 4x for example. The reason is cube token performance is measured relative to other tokens. If BTC goes up 1%, cubeBTC could theoretically still go down if the rest of the pool goes up by more than 1%.
If lots of people have bought the same cube token, it becomes diluted and the leverage will be lower for that cube token. The potential upside is also capped by the amount available in the rest of the pool.
If the pool share of your cube token is really high (say >30%) you could consider selling it as the potential upside might be lower than the possible downside.
Like all leveraged tokens, cube tokens are high risk products. They can gain or lose large amounts of value in a day.
Cube tokens are also experimental and unaudited and there's therefore various risks of smart contract bugs. So only deposit a small amount you'd be willing to lose.
There is a bug bounty for Cube tokens to ensure the code base is continuously scrutinised by the cybersecurity community.
Cube tokens are a simple way to get leverage if you don't feel strongly about a particular strike or expiry date or the exact level of leverage.
Compared to Charm options, a wider selection of tokens is available.
Cube tokens would not be suitable if you require precise leverage, for example for hedging.
FTX leverage tokens rebalance once a day at exactly 0:02 UTC, so they can easily be frontrun. Binance's leveraged tokens are rebalanced by a black box algorithm.
Cube tokens on the hand rebalance continuously. They can't leak value unlike centralized leveraged tokens, since other than fees they're a zero-sum game.
Also they're completely on-chain, meaning they operate in a fully transparent and trustless manner.
For each trade, a fee of 1.5% for ETH and BTC and 3% for other tokens is charged.
80% of fees go back to the pool and the other 20% go to the protocol. This means by holding a cube token, you can earn a cut of fees from each deposit and withdrawal.
These fees were chosen to prevent technical front-running. Chainlink price feeds update when the price moves by a certain deviation. This deviation is 0.5% for ETH/USD and BTC/USD and 1% for most other USD feeds.
This means, if ETH has almost moved by 0.5% since the last oracle update, cubeETH is mispriced by 1.5% and a trade could gain an almost risk-free profit of 1.5%. Thus a fee of 1.5% needs to be charged to protect funds in the pool. Similarly, for tokens other than ETH and BTC with a max deviation of 1%, a fee of 3% is required.
In the future, we also plan to add liquidity for cube tokens on Sushiswap/Uniswap so that users can trade cube tokens with lower fees. Arbitrageurs would be able to keep the cube token prices roughly in line.
No. Cube token prices were all initially set to 1, but the prices will drift as time goes on. If BTC goes up for example, cubeBTC should theoretically go up more and will be higher than 1.
Any token which has a Chainlink price feed denominated in USD with a max deviation of at most 1% can be added. This includes most large caps. An exception is SUSHI, which we wanted to add, but doesn't have a Chainlink feed in USD.
It's not advised for volatile tokens to be added without a restrictive pool share cap. If these moon or dump, they could eat a lot of value from the pool.
Yes. The team has various admin permissions including emergency withdrawing funds, pausing trading and changing parameters like caps and fees. Once our token and governance module have been launched, ownership of the pool will be passed on to a timelock contract controlled by the community.
The community will then be able to add markets and modify parameters like caps and fees.