Leverage Token based on MCDEX Perpetual (MAI3)

It is straightforward to design and implement a Defi leverage token protocol based on MCDEX Perpetual Protocol:

Mint (Buy)

  1. User deposits collateral tokens(e.g., USDC) to the protocol;
  2. The protocol deposits the collateral tokens into its margin account in MCDEX perpetual;
  3. The protocol opens a position with the target leverage(e.g., 3X) of MCDEX perpetual;
  4. The protocol sends the share token(leverage token) to the user;

Redeem (Sell)

  1. User sends leverage token to the protocol;
  2. The protocol closes a portion of its position of MCDEX perpetual;
  3. The protocol withdraw some collateral tokens from its MCDEX perpetual margin account;
  4. The protocol sends the collateral token to the users;

Rebalance

When the underlying perpetual position has PNL, the effective leverage of the leverage token is not the same as the original target leverage. In this case, the protocol shall increase/decrease its position size if it has profit/loss to make the effective leverage equal/near to the target leverage again.

The leverage token protocol shall introduce some strategies to rebalance its position:

  1. The protocol MAY rebalance at some fixed frequency, for example, once per day;
  2. The protocol MAY rebalance when the effective leverage is out of some range of the target leverage, for example, ±25%;

Besides, because the rebalance may trade a large size, the protocol should split the rebalance into smaller trades and reduce the slippage.

Community Development

I suggest the developers in our community complete the design and implement this product. MCDEX DAO should incentive such project because it will increase the use cases of MCDEX perpetual.

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Here is an example of the leveraged token implementation.

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