Dear PancakeSwap Community,
We are thrilled to present the next installment in our academy series, focusing on the Perpetuals V2 Liquidity Pool! Building upon our previous discussions, today we will delve into the key features of the liquidity pool, earning real yield with CAKE in the ALP pool, and how the ALP pool supports perpetuals trading on the PancakeSwap platform.
Introduction to the ApolloX Liquidity Pool
The ApolloX Liquidity Pool provides the primary liquidity pool on PancakeSwap Perpetuals V2 (powered by ApolloX) from which trades are drawn to create synthetic perpetual contracts. In other words, the ALP Pool is the direct counterparty of perpetual traders on Perpetuals V2. In addition, it offers a unique opportunity for users to become liquidity providers and earn substantial yield.
The ALP Pool and CAKE Utility
We’re excited to announce that CAKE was added in the ALP pool as one of the supported collateral tokens on 20 June 2023! This means that CAKE is not sold or converted to other tokens and is instead used for liquidity. Think of it as depositing CAKE into a liquidity pool.
Users can now buy or mint ALP using CAKE tokens and stake ALP to earn yield. Since the revenues from PancakeSwap perpetual trades are shared with ALP liquidity providers, users can earn real yield (~53% APY currently). CAKE holders who mint ALP using CAKE can earn yields of fee APY (43.75% as of June 23, 2023) and boosted yields on staking ALP (8.40% as of June 23, 2023). To get started, click here.
We have also launched CAKEUSD perpetual contracts on 20 June 2023, which means users can now trade CAKE on Perpetuals V2 with up to 75x leverage. This means users can trade CAKE with leverage and open larger positions on a token that they are familiar with. Users can also look forward to staking CAKE and farming ALP tokens on our Syrup Pools (coming soon).
Unlocking Liquidity with the ALP Pool
The ALP token is the proprietary liquidity provider token of the ApolloX platform and is made up of a pool of assets (USDC, USDT, BNB, ETH, BTC, HAY). Users can become liquidity providers by providing any of these aforementioned assets to buy ALP tokens.
ALP Tokens: Real Yield Generation Mechanisms
Holding ALP tokens presents an array of benefits for liquidity providers. ALP holders earn real yield through both the accrual of trading PnL and 20%-50% of the total platform fees, depending on seasonal trading reward programs. As well, ALP token holders participate in market making and take the opposite side of trades. The platform fees encompass various components, such as opening and closing position fees, execution fees, funding fees and liquidation fees. Notably, a 20%-50% portion of the total fee amount is accrued to the ALP pool.
Increased Asset Diversity
For the ALP pool to perform and return yield, a diversified asset base is crucial to protecting the downside risk of the pool. Token weights are determined by the stability of the token and are kept at an ideal ratio. A transaction fee is thus charged to encourage users to mint ALP using different assets. This fee is adjusted based on the target weight and current weight of assets in the ALP pool.
A lower transaction fee is charged to incentivize users and align the current weight of assets in the pool with the target weights. This encourages users to take actions that bring the asset composition of the pool closer to the desired targets. The transaction fee charged during buying or selling ALP is retained in the pool.. For more details on the transaction fee mechanism, please visit here.
Flexible ALP Utility
Users have two primary options for generating yield through the ALP token. They can hold ALP tokens to earn yield through fee (43.75% as on 23-Jun-23). Moreover, users can stake ALP to earn additional APX rewards (currently 8.40% in boosted APY). These APX rewards are calculated based on a predefined methodology (more details here), are paid per block, and can be claimed instantly without any lock-ups or vesting schedule.
Yield Sustainability
Since the ALP pool provides liquidity and acts as a counterparty to all trades on PancakeSwap V2, the ALP pool yield becomes more sustainable with more volume and activity on the PancakeSwap perpetual trading platform.
Future Developments
In addition to ALP’s current uses, utilities such as margin for perpetual trading and participation in DAO governance and voting, will be introduced in the future. These enhancements will expand the ecosystem surrounding ALP, providing users with greater opportunities for engagement and rewards.
Making Perpetuals V2 More Efficient Than Ever
Deeper liquidity pools makes trading on PancakeSwap Perpetuals V2 more efficient, allowing for higher trading volumes, larger notional trade sizes, increased trading activity, and more fee earnings.
We hope this blog post on the key features of the ALP pool in PancakeSwap Perpetuals V2 has provided you with valuable information and insights. We invite you to explore all the exciting new features to enhance your trading experience. Stay tuned for our upcoming posts, where we will continue to share more insights and updates about Perpetuals V2.
Want to learn more in the meantime? Check out our V2 initial announcement here, our step-by-step guide here, and click here to start Perpetuals trading.
Stack’em,
The Chefs 🥞