Much like ETH2x-FLI on Ethereum main net, ETH2x-FLI-P is a structured product in ERC-20 format that enables traders to automate leveraged exposure in a completely decentralized manner. The 2x-FLI tokens target a long 2x exposure to the underlying asset, with a flexible leverage ratio for optimal rebalancing outcomes.The FLI suite is built in collaboration with DeFi Pulse to minimize the risks and costs associated with maintaining collateralized debt positions. ETH2x-FLI-P is now available on TokenSets Polygon (for non-U.S. users) with an initial supply cap of 250k tokens.In this post, you will learn:
Leverage is one of the most popular use-cases for DeFi. However, legacy processes for creating leverage positions in DeFi are not for the faint of heart. Users must monitor health ratios, manage collateral and debt positions, and risk liquidation during downturns. For example, volatile Bitcoin price action caused $10b worth of liquidations earlier this year. Using FLI tokens is a simpler and safer alternative to manual leverage methods.There are 4 major benefits to using ETH2x-FLI-P:
Decreased (though not eliminated) risk
Lower gas fees
Ease of use
Composability with DeFi protocols
Leveraged products are inherently risky. ETH2x-FLI-P decreases that risk for you by programming the leverage ratio to recenter automatically at predefined intervals. This allows the product to absorb major volatility spikes, and rebalance in a flexible manner to ensure collateral levels stay above liquidation thresholds. FLI tokens also utilize an emergency de-levering mechanism — referred to as ‘ripcord’ — as another safety layer in case of black swan events. Additionally, because FLI products are over-collateralized, there is a better risk profile compared to products that use synthetic leverage.Another benefit of FLI tokens is their redeemability. They are the first fully-collateralized leverage tokens that can be redeemed for the underlying components: WETH and borrowed USDC. This allows token holders to handle the underlying asset and debt position however they would like, rather than simply exchanging the token for a separate, singular asset.
FLI also minimizes gas costs associated with rebalancing by utilizing a unique algorithm that increases rebalancing efficiency by an order of magnitude. Additionally, the token’s 1.95% (annualized) streaming fee is considerably less expensive than alternatives on centralized exchanges that can charge upwards of 10.95% annually, and there is also no slippage due to composable entry and exit. Also, because ETH2x-FLI-P is a Polygon-native token, it can be easily minted with negligible fees through the TokenSets website.
Best of all, the Flexible Leverage tokens are exceedingly easy to use. Simply buy and sell like you would any other token on TokenSets or Sushiswap for collateralized debt management abstracted into a single token! ETH2x-FLI-P rebalances your leverage position for you, so liquidation risk is lower and constant monitoring is not required.
Because ETH2x-FLI-P is a fully collateralized ERC-20 Set token, it can be integrated into a number of different DeFi protocols and platforms to expand its utility and use cases.Under the hood, ETH2x-FLI-P is also built on Aave Polygon, the borrowing/lending protocol that enables the creation of over-collateralized debt positions. See this article for more information on how FLI products utilize composability.
Like all Index Coop products, ETH2x-FLI-P follows a strict methodology. Pulse, Inc. has published a detailed breakdown for FLI — Introducing the Flexible Leverage Index — and TokenSets has shared technical details here.
Initial parameters for the ETH2x-FLI-P:
Underlying Asset: WETH
Target Leverage Ratio:2.0
DeFi Lending Protocol: Aave Polygon
Maximum Leverage Ratio: 2.3
Minimum Leverage Ratio: 1.7
Rebalance Interval: every 4 hours
Recentering Speed: 2.5%
Supply Cap: 250,000 tokens
More information on FLI product parameters can be found here.Fees: ETH2x-FLI-P will have a streaming fee of 1.95% (195 basis points) and a 0.1% mint /redeem fee.
The Index Coop is partnering with Sushiswap for Polygon-native FLI launches, and as a result, liquidity provider rewards will be activated for the ETH2x-FLI-P / WETH pool! A “How To” guide for providing liquidity will be published in the near future.
Disclaimer: This content is for informational purposes only and should not be construed as legal, tax, investment, financial, or other advice.
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