It is straightforward to design and implement a Defi leverage token protocol based on MCDEX Perpetual Protocol:
- User deposits collateral tokens(e.g., USDC) to the protocol;
- The protocol deposits the collateral tokens into its margin account in MCDEX perpetual;
- The protocol opens a position with the target leverage(e.g., 3X) of MCDEX perpetual;
- The protocol sends the share token(leverage token) to the user;
- User sends leverage token to the protocol;
- The protocol closes a portion of its position of MCDEX perpetual;
- The protocol withdraw some collateral tokens from its MCDEX perpetual margin account;
- The protocol sends the collateral token to the users;
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:
- The protocol MAY rebalance at some fixed frequency, for example, once per day;
- 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.
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.