Part 3: How do I Manage My Position?
TLDR
- A new 90:10 pool for liquidity providers who’d like to reduce exposure to the paired currency.
- Token sponsors can mint extra pxAssets with excess collateral in a new 2-in-1 step that saves on gas fees, as long as the Collateralization Ratio (CR) of their resulting position is equal to or greater than the Global Collateralization Ratio (USD) (GCR).
- Token sponsors can now more easily withdraw any excess collateral to better utilize their capital.
- Token sponsors can withdraw excess collateral in one of two ways: a “fast” withdrawal or “slow” withdrawal (more detail on these below).
- If token sponsors’ position is higher than the GCR after the withdrawal, the token sponsor can withdraw the excess collateral immediately via a “fast” withdrawal.
- A “slow” withdrawal will have to go through a “withdrawal liveness period”. If the “withdrawal liveness period” passes without a token holder liquidating the token sponsor, the token sponsor may withdraw collateral from their position.
Introducing 90:10 pool
Managing position in pxAsset pool can sometimes be wearying. In PerlinX v2.2, liquidity providers can stake into our new 9:1 pool to reduce exposure to the paired asset, minimising divergence loss.
The 90:10 pool that will be available on PerlinX v2.2 is PERL/USDC.
Relationship between price movement and Collateralization Ratio
Token sponsors’ CR changes when there are movements on PERL price or the price of the asset the synthetic is tracking.
Here’s how price movement will affect the CR:
Fast withdrawal
As long as the token sponsor’s position is still at least as much as the GCR after the withdrawal of the excess collateral, the withdrawal can be done immediately. Requiring token sponsor’s position to be as high as GCR provides some assurance so long as the other token sponsors collateralized below the GCR have not yet been liquidated, this token sponsor should not be liquidated after making this withdrawal.
For example, PERL price is 0.02 and the token sponsor has minted 100 pxUSD with 15,000 PERL (worth $300) as collateral. This would result in a CR of 3.0. If the GCR at this point is 2.0, the token sponsor can withdraw up to 5000 PERL (one third) from his position to lower his CR down to 2.0. When the withdrawal is completed, the new GCR would be lower than 2.0, allowing easier other token sponsors to mint pxUSD with less collateral in line with the lower GCR.
Slow withdrawal
Withdrawing collateral from the position below the GCR can put the token sponsor’s solvency at risk. Therefore, this “slow” withdrawal method allows other token holders to flag the position if the proposed withdrawal would cause the token sponsor’s position to be below the Liquidation Ratio (collateral requirement).
In this 2-step withdrawal process, token sponsors who wish to withdraw collateral can submit a withdrawal request with the amount they wish to withdraw. The withdrawal request now enters a 3-hour “withdrawal liveness period”.
During the “withdrawal liveness period” starting from the time where the withdrawal is requested, any token holder can liquidate the token sponsor’s position if they believe the withdrawal of the amount indicated in the withdrawal request would bring the token sponsor’s CR below the collateral requirement. If the “withdrawal liveness period” passes without a token holder liquidating the token sponsor, the token sponsor may withdraw the requested amount of collateral from their position.
2-in-1 step for minting pxAssets with excess collateral
In addition to withdrawal of excess collateral, token sponsors who wish to mint extra pxAsset with excess collateral can do so with this 2-in-1 step, saving on gas fees.
When the token sponsor’s CR is much higher than GCR, he can mint extra pxAsset with the excess collateral to lower his CR to the GCR.
Same as the example above, PERL price is 0.02 and the token sponsor has minted 100 pxUSD with 15,000 PERL (worth $300) as collateral. This would result in a CR of 3.0. If the GCR at this point is 2.0, the token sponsor can mint up to 50 pxUSD (this new pxUSD would need to meet the GCR as well) “increasing” his debt to lower his CR down to 2.0. When the minting of pxAsset with excess collateral is completed, the new GCR would be lower than 2.0.
Adding Collateral
At any point in time, token sponsors can add collateral to their position to a “safer” (i.e. higher) ratio to raise the CR further above the liquidation ratio (e.g. adding PERL in excess of the collateral requirement).
A complete guide to managing your position can be found here.
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Useful Guides:
PerlinX & UMA Synthetic PxAsset Minting
Part 1: Introducing PxUSD & what you can do with it
Part 2: All the Calculations & Values You Need to Know
Part 3: How Do I Manage My Position?
PerlinX User Guides:
Other PerlinX links:
Recent Updates:
Other Useful Links:
Warning
This post is not investment advice. As with exposure to all assets, there are risks involved in trading synthetic tokens, which you need to assess for yourself before participating. Minting synthetic PxAssets using PERL means that you will be exposed to the price volatility of both the PERL and the PxAsset (both upside and downside!). Always do your own research and don’t use any funds you can’t afford to lose.
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