Polars: Unique Platform Device.
In order to implement the concept of polar tokens and at the same time take into account the principles of decentralization and the interests of all categories of platform users, we have implemented a combined system of unique smart contracts, which will be discussed in this article. As in the previous article on the basic concept of the Polars platform, we will try to describe the technical device in the simplest possible terms.
The main aim of Polars smart contracts is to implement the basic concept of polar tokens. Users should be able to buy, sell and exchange polar tokens at current spot prices at any time. The platform should consistently take into account the results of specific events from the real world, and after the end of each event, the spot price of polar tokens should change.
In this article we will look at several of the most important building blocks of the Polars platform:
- Base Pool
- Secondary Pool
- Trade Pool and other third-party Pools.
- Events Lifecycle
Polar tokens are minted and burned in this pool. Each polar token that is minted and outside the Base pool is backed by an underlying asset that is in the Base pool.
In order to mint polar tokens, the user needs to send an underlying asset, for example USDC, to the Base pool. In order to return their USDC back, the user needs to return the polar tokens back to the base pool and burn them.
There are several features in the base pool that are worth paying attention to:
- In the base pool, you can only take the same number of polar tokens at their aggregate price. It is BWT token. For example:
for 1000 USDC
- Therefore, in order to receive 1000 BWT, the user must send 1 ETH to the base pool, provided that the current aggregate price of WHITE and BLACK tokens is at 1 USDC.
- Only the same number of WHITE and BLACK tokens (BWT) can be returned back to the base pool. For example:
The user will receive back the underlying asset at the current aggregate price of the WHITE and BLACK tokens (BWT). If the current aggregate price is at 1 USDC, the user will receive 1000 USDC back, returning 1000 BWT tokens to the base pool.
- The total price of BLACK and WHITE tokens (BWT) is calculated using the formula: The amount of the underlying asset in the base pool / the number of minted BWT tokens.
Number of USDC in the base pool: 100,000 USDC
Number of minted BLACK & WHITE tokens (BWT): 100,000 BWT
The total price of polar tokens: 100000/100000 = 1 USDC.
- The aggregate price of polar tokens never goes down. Within the framework of the protocol, only mechanisms for increasing the aggregate price of polar tokens are laid down (sending 20% of platform commissions to the base pool). Therefore, a user who has taken polar tokens from the base pool has no opportunity to lose funds.
Thus, the system is arranged in such a way that absolutely all polar tokens BLACK and WHITE are backed by the underlying asset, which is located at the address of the smart contract of the Base pool. Any user who has the same number of two polar tokens can return them to the base pool and receive the corresponding amount of the underlying asset based on the current aggregate price of the polar tokens.
This is the most unique pool within the Polars ecosystem. In it, users can buy, sell and exchange polar tokens individually at their current fixed spot price with no slippage.
Market makers and liquidity providers who have taken polar tokens in the Base pool can place those tokens as liquidity in the Secondary Pool. Users can now buy these tokens individually in any amount available.
There are several unique features in the Secondary Pool that you should pay attention to:
- In order to add liquidity to the secondary pool, the user only needs to add BWT tokens. For example:
The underlying asset (e.g. USDC) in the secondary pool does not need to be added, since it is in the base pool as collateral.
- Since the aggregate price of polar tokens does not change, liquidity providers actually have no risk of intermittent losses. The market maker adds 1000 BWT, and will be able to take back 1000 BWT + 50% of the Liquidity fee. Thus, IL risks are completely absent.
- There is no such thing as slippage in the Secondary Pool. Users can swap at the current spot price of polar tokens in any amount that allows the amount of provided liquidity in the secondary pool. The price is fixed, and changes at the end of each event, which affects the price of polar tokens.
- The Secondary Pool does not work directly during the event. You can buy and sell polar tokens only during the time between events. If a user needs to make a swap directly during an event, he can use other pools, for example, Trade Pool, which work all the time.
Thus, the Secondary Pool allows users to buy and sell polar tokens at fixed prices without slippage. Additionally, this creates permanent colossal arbitrage opportunities with other AMM pools, where price depends on supply and demand. For Liquidity providers, the advantage is the absence of IL risk, unlike traditional pools. The only feature that makes it reasonable to use third-party pools is the fact that the secondary pool is closed directly during events, and transactions in it can only be made during the time between events.
Trade Pool and other third-party Pools.
Users should be able to transact polar tokens anytime around the clock. As we noted above, the Secondary Pool is closed for the duration of the event. If the user wishes to make a deal with polar tokens during the event, he should have such an opportunity. For this, we have created a separate Trade Pool on the Polars platform, which works around the clock. We also recommend that users use third-party pools with a high level of liquidity, such as Uniswap, Balancer. Sushiswap, Pancake Swap, Bakery Swap, etc.
Polars Trade Pool is a fork of the Balancer trading pool. Liquidity from 3 tokens (WHITE, BLACK, ETH or another base asset) can be added to it and users can make transactions in the standard mode. Unlike the Secondary Pool, in which the price is fixed and depends on the results of events from the real world, in the Trade Pool the price of tokens depends solely on market mechanisms. It should also be borne in mind that the Trade Pool has slippage, and liquidity providers have a risk of Impermanent Losses.
Therefore, the question may arise: what can motivate users to add liquidity to the Trade Pool if it is safer to supply liquidity to the Secondary Pool? To do this, we have increased the rewards in the form of profitable farming by one and a half times compared to the Secondary Pool rewards.
Once the event ends and the Secondary Pool opens, many arbitrage opportunities are created due to the price being fixed in the Secondary Pool. In Trade Pool and other third-party pools, the price can differ significantly from the fixed price of the Secondary Pool and it will almost instantly be balanced by the arbitrageurs.
The price of polar tokens is influenced by real events from the outside world. Each event has a set of parameters that the smart contract of the event lifecycle takes into account:
- Date and time of the beginning and end of the event.
- Type of the event (sports, cyber sports, politics, exchange rates, custom)
- League, championship, etc.
- Opposing sides (Units)
- Unit belonging to the team (White Team, Black Team)
- Winning and losing criteria
- Event result.
Ultimately, this smart contract determines when the Secondary Pool will open and close, and at the end of the event, it transmits the result of the event to the Secondary Pool, where the price changes of polar tokens are calculated.
At the MVP stage, the list of events will be formed by the administrator of the Polars platform, but in the next version of the product, users will be able to independently propose events and vote for their addition to the Polars platform.
The new DeFi platform for creating secure polar tokens, the price of which depends on the results of specific external events. Within the POLARS platform, users can buy, sell and exchange polar tokens, as well as participate in the distribution of the platform’s commission income.