Providing Liquidity

The Golden Finance Liquidity Pool ("GLP") is an integral part of the protocol that enables trade execution and settlement.

Golden Finance Liquidity Pool ("GLP")

It is important to understand GLP's role in the protocol before describing the trading process.

GLP is an index consisting of 50% of ZETA, 20% of USDT, 20% of wETH and 10% wBTC.

You can view the live composition of GLP Pool here (insert link)

To compensate depositors, Golden allocates part of the protocol fees to depositors along with other benefits (more details here)

Learn how to deposit liquidity into GLP here (insert link)

Market Making with GLP

Depositors of GLP provide liquidity and acts as a market maker for perpetuals trading / spot swaps on Golden Finance. As the counterparty to trades, the different sides of the pool caters to different directions of trading.

• Long Trades: On Golden Finance, long trades, such as long BTC positions, are physically settled. Trade settlement occurs in the respective trading pair. Profits or losses from long positions are realized in the underlying asset itself.

Trade Example: Long BTC / USDT

Parameters:

• Entry Price: $10,000

• Collateral: 1 BTC

• Leverage: 50x

• Reserved Amount: 50 BTC

Upon execution of this trade, 50 BTC will be reserved from GLP. The following scenarios illustrate potential outcomes:

1. Exit Price = $10,100 (+1% price movement)

   • Profit Calculation: 1% * 50x = 50%

   • Result: The trader profits 50%, and 0.5 BTC from the Reserved Amount is paid out to the trader.

2. Exit Price = $9,900 (-1% price movement)

   • Loss Calculation: -1% * 50x = -50%

   • Result: The trader incurs a 50% loss, and 0.5 BTC will be added to the

• Short Trades: In contrast, short trades on Golden Finance are cash-settled. This implies that the settlement for short positions is in USDT.

Trade Example: Short BTC / USDT

Parameters:

• Entry Price: $10,000

• Collateral: 1,000 USDT

• Leverage: 50x

• Reserved Amount: 50,000 USDT

Upon execution of this trade, 50,000 USDT will be reserved from GLP. The following scenarios illustrate potential outcomes:

The following scenarios illustrate potential outcomes

1. Exit Price = $9,900 (-1% price movement)

   • Profit Calculation: 1% * 50x = 50%

   • Result: The trader profits 50%, and 500 USDT from the Reserved Amount is paid out to the trader.

2. Exit Price = $10,100 (+1% price movement)

   • Loss Calculation: -1% * 50x = -50%

   • Result: The trader incurs a 50% loss, and 500 USDT will be added to the GLP pool.