Crypto Asset-Backed Pools

Asset-Backed Trading

Asset-Backed Perpetual Swaps on Vela Trade are derivatives where positions are backed by the underlying assets they represent. Traders can borrow price exposure from the pool, and the availability of BTC and USDC in the pool ensures the perpetual swap contracts can always be settled.

This asset-backed structure guarantees that traders will always be able to settle their positions when desired, with profits and losses tied directly to the underlying assets. It also minimizes the need for a large insurance fund, as there will always be liquidity available for settling positions from the pool.

Perpetual Swaps are paid out in the native assets within the pool (BTC or USDC), making them less dependent on stablecoins and reducing counterparty risk.

Collateralization & Asset Swapping

Trades will always be collateralized by the asset the trader wishes to long. For example, if a trader wants to long BTC, they will use BTC as collateral. If the trader chooses USDC as collateral, the protocol will dynamically swap USDC for BTC on the backend before opening the position.

Note: The swap occurs automatically on the protocol’s backend, and traders will incur a swap fee in the process.

Example 1:

Trader 1 deposits $1,000 worth of USDC and wants to long BTC at 10x leverage. If BTC’s price is $30,000, the protocol will swap the $1,000 USDC for BTC and open a position equivalent to 0.0333 BTC (this does not include swap fees, opening fees, or any borrow fees).

Shorting Positions:

To short an asset, traders must use USDC as collateral. For instance, if a trader wants to short BTC, they must deposit USDC as collateral. If they deposit BTC, the protocol will automatically swap it to USDC before opening the short position.

Asset-Backed Pool

The perpetuals are backed by the BTC and USDC in the pool. Only perpetual contracts for these assets can be initiated. As the pool always holds sufficient BTC for long positions and USDC for short positions, traders are guaranteed liquidity for settlement, ensuring there are no limitations on their potential profits or losses.