Minting and Burning VLP

When liquidity providers deposit wBTC or USDC into the Vela Trade Liquidity Pool (VLP), they can mint VLP tokens in return, representing their share in the pool.

The minting fee is dynamic and depends on the balance and ratio of assets in the pool. This fee ensures the pool remains balanced and stable. The minting fee is calculated using the following formula:

$$\text{MintFee}_{\text{\scriptsize total}} = \text{LP}_{\text{\scriptsize addVariable}} + \text{LP}_{\text{\scriptsize addBase}}$$

• LP add Variable: This is the fee based on the current market ratio of assets in the pool.

• LP add Base: This is a base fee added to the total mint fee.

Important: If an asset reaches its max ratio (e.g., wBTC), it will no longer be eligible for minting. In this case, try using a different asset like USDC to mint the VLP tokens.

Burning VLP Tokens

When liquidity providers wish to withdraw their liquidity by burning VLP tokens, they incur a burning fee. The burning fee is dynamic, depending on the balance and ratios of assets in the pool after liquidity is removed. Additionally, there is a penalty fee of 5 basis points (bps) to discourage frequent withdrawals.

The burn fee is calculated as:

$$\text{BurnFee}_{\text{\scriptsize total}} = \text{LP}_{\text{\scriptsize removeVariable}} + \text{LP}_{\text{\scriptsize removeBase}} + \text{LP}_{\text{\scriptsize penaltyFee}}$$

• LP remove Variable: This fee adjusts based on the current market ratio of assets in the pool.

• LP remove Base: This is a base fee added to the total burn fee.

• LP penalty Fee: A fixed penalty fee to discourage frequent withdrawals.

Important: If a token reaches its min ratio (e.g., wBTC), it cannot be used for burning VLP tokens. In this case, try using another asset, like USDC, to receive your liquidity when burning VLP tokens.

Utilization Limit

The pool utilization is capped at 90% for trading activity. This means that burning VLP tokens is generally possible unless trader utilization reaches 100%. If the pool is at full utilization, burning VLP tokens for specific assets (such as wBTC or USDC) will not be possible until the utilization drops below 100%. In this case, we recommend trying to burn VLP tokens for a different asset.

Burn Fee Details

The components of the burn fee are defined as follows:

• LP Remove Penalty: This is a fixed fee of 0.0005.

• Fee Min: This fee is set at 0.

The burn fee is influenced by the ratio of the assets in the pool:

LP add Variable Calculation:

• M(Ratio): The fee based on the current ratio of the asset in the pool.

• b: A factor determined by the difference between the fee target and the minimum ratio.

LP remove Variable Calculation:

• M(Ratio): The fee based on the current ratio of the asset in the pool.

• b: A factor determined by the difference between the fee target and the maximum ratio.

Token Fee Structure (in Basis Points)

These fees ensure the pool stays balanced and liquid while rewarding liquidity providers with proportional fees based on their contribution.

Token	Fee Target (bps)	Fee Max (bps)	Base Fee (bps)
wBTC	10	25	5
USDC	10	25	5

These fees ensure the pool stays balanced and liquid while rewarding liquidity providers with proportional fees based on their contribution.