Influx
Influx is an entirely new liquidity primitive that generalizes the very notion of leverage itself. Influx can be any leveraged product off any source of liquidity. Influx is optimized for longer tail assets and is uniquely able to handle volatile assets like memecoins that can go to zero or 10x within seconds.
Leverage from liquidity
Let’s take the simplest example of leveraged product from a source of liquidity: Building a perpetual market off of Uniswap v3-style (concentrated) liquidity.
Concentrated LPs can concentrate liquidity in small regions of the constant-product curve. Suppose a LP were to concentrate their liqudity in a super small region around the price of $100 per SOL. Then below a price of $100, the LP would be holding pure SOL (say 5 SOL), which then be sold for pure USDC once the price exceeded $100. Ignoring fees, the curve of the LP payoff would look like the following:
Now suppose Alice were to borrow the 5 SOL from the LP. If the price is below $100, she simply grabs the 5 SOL. If the price is higher than $100, say $125, she takes the 500 USDC from the LP, converts it to 4 SOL and then provides the remaining 1 SOL herself. The 1 SOL can be thought of as the collateral for the trade, and so Alice is 5x leveraged.
What happens if the SOL price drops below $100? Then Alice simply returns the 5 SOL to the LP position. What if the SOL price rises massively to $250? Then Alice sells 5 SOL for $1250 and repays the LP with 500 USDC, pocketing the remaining USDC. No matter what the price of SOL is, Alice is always able to repay the LP while realizing her profits.
More formally, Alice now has exposure to 5 SOL, represented by the middle graph. However, she still has a debt to the LP, equal to the price of the LP positions, represented by the rightmost graph. Subtracting the two graphs, Alice’s payoff is the green area located past the price of $100. That is exactly the payoff curve of a leveraged long!
To create a leveraged short, it is a matter of swapping the roles of USD and SOL. Alice borrows the 500 USDC if the price is above $100, or sells the 5 SOL for USD and posts collateral if the price is below $100.
What if the original LP didn’t concentrate their liquidity in a super small region? Well any LP position can be sliced up in smaller concentrated positions. By combining several of these smaller concentrated positions, a leveraged position can be built in the same way.
Borrowing liquidity creates leverage.
There is something truly remarkable about building perpetuals in this fashion: by definition, the account value of the trader will never be negative. This means that Alice will never create bad debt no matter what the price of SOL is.
In virtually all other exchanges, if the account value of a leveraged trader strays too close to zero, the exchange will liquidate the trader, forcibly closing their position their position and seizing their remaining margin. At high leverage (15x and higher), it is often the case that traders lose money to liquidations due to natural fluctuations in price even if they are directionally correct about the price of the asset.
By mathematically guaranteeing no bad debt for the exchange, Influx avoids liquidations entirely. If a ‘scam wick’ briefly causes the price of SOL to drop below $100, Alice’s position remains open, allowing her to continue her directional bet on SOL.
Alice’s position is eventually closed however. Rather than paying for a perpetual position and having it closed if the price moves against her, Alice pays upfront the cost of borrowing the LP position and is then granted a liquidation-free perpetual position for a limited amount of time. Instead of a price-based liquidation, Alice experiences a time-based liquidation.
Memecoins
What sort of assets have great AMM liquidity, but are often too volatile to safely provide leverage for? Memecoins of course!
Memecoin markets are subject to the most brutal volatility and manipulation in all of crypto. Tokens regularly crash to zero or 10x within seconds. For a traditional perpetual DEX, it is impossible to list these assets until they are more stable.
Influx allows users to leverage memecoins. Imagine longing tokens like SLERF as soon as they launch, and watching as it races up 500% within hours. Imagine being able to bet on memecoins going down for the first time. All while being protected from scam wicks, manipulation, and liquidations.
Time-based perpetual positions also make the most sense within the context of memecoins. Time is incredibly precious within the memecoin space. Entire fortunes can be made or lost in the span of minutes.
Influx is also a memecoin launchpad. Influx will automate much of the work that is required from memecoin creators: seeding the initial AMM liquidity, setting up pre-sales and fair launch, and deploying the smart contracts to the blockchain. Creators can then focus on what’s important: marketing, branding, and community engagement.
Tokens that are launched on Influx will be available for leveraged trading as soon they launch.
By automating much of the work for creators, Influx also indirectly protects users from mishaps and rugpulls (although even rugpulls can make money for users due to shorts).
Influx will allow users to trade perpetuals for the full breadth of tokens available on-chain. Of the top tokens by on-chain trading volume, very few are listed on popular perpetual exchanges. Influx taps into this market for the first time.
Tailored to Asset Types
We talked about liquidation-free perpetuals, but what is the big picture behind Influx? Influx tailors itself to target various assets with liquidity that is optimized for them.
For the most liquid assets like ETH, BTC, and SOL, nothing matches an orderbook for simplicity and capital efficiency. For institutional investors and market makers, it is the venue of choice and will lead to great improvements to slippage and spread. For retail users for whom it is virtually impossible to provide orderbook liquidity, they can still get exposure to market making yields via AMM liquidity.
For volatile assets and new tokens, Influx will use liquidation-free perpetuals based on AMM liquidity. This allows Influx to leverage any asset without bad debt or liquidations and will allow Influx to be the fastest exchange in listing new assets.
Liqudity Primitive
Influx can be any leveraged product off any source of liquidity.
We have been discussing how to build a perpetual market from Uniswap v3 liquidity. However, the same ideas can be reused to build any leveraged product of any source of liquidity.
One other common leveraged product outside of perpetuals is lending. Influx can support both a perpetual exchange and a lending protocol, with both co-existing off the same liquidity. As a result, LPs would earn fees from both protocols at the same time. But that is not the only possible application: Dated futures and options are both products that can be built from Influx.
Similarly, Influx is not specific for Uniswap v3 liquidity. A perpetual market can be made off of any liquidity source, including other AMM types and lending protocol liquidity.
Influx is effectively a liquidity primitive from which multiple leveraged applications can be built using multiple types of liquidity. To support this, Influx has a two-way hook-based architecture that allows new applications and new sources of liquidity to seamlessly connect with the Influx ecosystem.
For liquidity providers, they get more yield without any additional loss to themselves. For applications, they get access to a deep pool of liquidity comprised of every source and asset imaginable.
Influx is the radical new liquidity layer of DeFi.
About Influx
