Permissionless Token Lending Pool

The FWX Lending Pool provides users with an opportunity to earn rewards by supplying liquidity while supporting the leveraged trading ecosystem

Overview

The Permissionless Token Lending Pool on FWX is a unique feature that is activated after a token is listed through the Future Permissionless Listing process. Once a token is listed, the protocol automatically creates a lending pool for that token, allowing anyone to deposit their tokens into the pool. These liquidity providers earn passive income through borrowing fees paid by traders when they take long or short positions on the asset.

FWX utilizes NFT membership records, enabling users to monitor principal and interest separately. Interest can be claimed without needing to unlend tokens. Lenders can withdraw their tokens at any time, except when pool liquidity is insufficient due to high demand, in which case total interest is automatically claimed upon unlending all tokens. Higher-tier membership NFT holders receive additional interest based on their tier. However, lending in FWX carries risks, as liquidity providers may not fully unlend tokens if the borrowed tokens cannot be fully repaid.

Lending APR Formula

The APR for lending for general membership is calculated using the formula below. The percentages of 90% can be higher for higher membership tiers. The APR for borrowing seen in the formula is a peicewise linear function of a utilization rate, with an increasing slope.

$$\begin{equation*} \text{APR}^\text{lending}=\frac{90\text{\%}\times \sum\limits_{i=1}^N\left(\text{APR}^\text{borrowing}_i\times \text{borrowingAmount}_i\right)+20\text{\%}\times\delta\times \text{dailyTradingVolume}\times 365}{\text{totalLendingAmount}}. \end{equation*}$$

Dynamic Interest Rates

The lending pool operates with an adaptive interest rate model, ensuring competitive returns for liquidity providers (LPs) and fair borrowing costs for traders.

Similar to lending protocols like COMP/AAVE, liquidity providers (LPs) will receive their APR when traders close their positions or when the protocol liquidates a user's position. The fees collected from these actions are then distributed to LPs based on their proportional contribution to the lending pool.

The APR shown on the frontend is calculated based on the summation of the current positions that are still open, providing an estimate of the returns LPs can expect. This calculation adjusts dynamically as positions are opened and closed.

Interest from Borrow Over Collateral

• Source: Paid by traders who use the Leverage DEX to borrow tokens from the lending pool for leveraged trading.

• Distribution:

  • 90% of the collected interest is distributed proportionally to lenders based on their contributions to the pool.

  • 10% serves as an operational fee for FWX, helping sustain the platform's ecosystem.

• Membership Benefit: Users with higher-tier FWX NFT memberships may receive a more favorable distribution ratio, allowing them to maximize their earnings.

Interest from Trading Fee

• Source: Futures trading fees derived from the use of liquidity for hedging positions.

• Distribution:

  • 20% of these trading fees are allocated to liquidity providers, offering an additional yield stream alongside borrowing interest.

Bonus Interest (Optional)

• Source: FWX rewards liquidity providers with a constant number of tokens per block as part of incentive campaigns.

• Distribution:

  • Paid directly to lenders based on their contribution to the pool.

  • Higher-tier NFT membership holders receive a greater share of the bonus interest.

• Inflation Control: Bonus interest is deliberately minimized or set to zero outside of campaigns to protect against FWX token inflation.

Compound Interest with FWX NFT

• User positions in the lending pool are tokenized into FWX NFTs, enabling innovative features like position transfer between wallets.

• Interest earned is auto-compounded, maximizing returns for LPs

Permissionless Integration

The pool supports permissionless listing, allowing new tokens to integrate effortlessly into the ecosystem

Risk Management

• FWX employs robust liquidation mechanisms to protect the pool, inspired by industry standards like AAVE and Compound.

• The protocol uses a subsidization function in extreme cases, ensuring fair loss-sharing among LPs during zero-day attacks or other catastrophic events.

The FWX Lending Pool incentivizes liquidity provision with multiple earning streams while incorporating risk management, membership benefits, and sustainable tokenomics to create a robust and rewarding experience for participants.