OLP consists of an index of the assets used on the platform for swaps and leverage trading. Users can mint OLP by adding any index asset to the liquidity pool (LP) while OLP is burned each time a user removes any index asset from the LP.
OLP Staker accrues 60 - 70% of the platform's generated fees in the form of WETH.
The OLP token is designed to supply the liquidity required for leverage trading. As such, OLP holders are the liquidity suppliers and they make a profit when leverage traders make losing trades. On the contrary, they make a loss when leverage traders make profitable trades.
Minting and Redeeming
OLP can be minted and redeemed by going on the “Earn” page from the header and clicking on the “Buy OLP” / "Sell OLP" buttons in the OLP box.
This will take you to the following screen where you will see a recap of all OLP characteristics: Price, Wallet holdings, Staked amount, APR, Total supply.
In box 1 you can choose to mint (“Buy OLP” button) or redeem (“Sell OLP” button) OLP. You can choose any index asset to spend or redeem in using either button 2 or any of the buttons in zone 3.
After having chosen an asset, enter an amount in order to see the fees required in zone 4. The price for minting and redemption is calculated based on total worth of assets in index including profits and losses of open positions / OLP supply.
Being able to provide/redeem the assets the most/less sought after by the protocol will allow you to lower your fees.
Please note that minted OLP immediately start accruing rewards and that there is a holding time of 15 minutes after minting before you can redeem OLP tokens.
The fees to mint or redeem OLP vary based on whether the action is aligned with the protocol’s needs at that time or not. For example, if the index has a large percentage of ETH and a small percentage of USDC, actions which further increase the amount of ETH the index has will have a high fee while actions which reduce the amount of ETH the index has will have a low fee.
Token weights are adjusted to help hedge OLP holders based on the open positions of traders. For example, if a lot of traders are long ETH, then ETH would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to stablecoins.
If token prices are increasing, then the price of OLP will increase as well, even if a lot of traders have a long position on the platform. The portion reserved for long positions can be treated as stable in terms of its USD value since if prices increase the profits from that portion will be used to pay traders, and if prices decrease, the losses of traders will keep the USD value of the reserve portion the same.