The Morphex Liquidity Pool (“MLP”) consists of an index of assets used for swaps and leveraged trading. It can be created, or minted, using any index asset and can be redeemed, or burnt, to receive any index asset. The price for minting or redeeming MLP is determined by dividing the total value of assets in the index, including profits and losses from open positions, by the supply of MLP.
Holders of MLP earn rewards in the form of Escrowed MPX and a portion (60%) of platform fees paid in FTM. It's important to note that the fees distributed to MLP holders are calculated after deducting referral rewards and network costs for keepers.
If leverage traders make a loss, then MLP holders will make a profit, as they are providing the liquidity for trading (this also works in reverse). Past performance data, MLP price charts, and other statistics can be found on the analytics site.
To mint MLP, you can visit the Liquidity tab to see a list of available MLP tokens, with the option to choose one with the lowest fees (found in the Save on Fees section), and then enter the amount you want to purchase (with Mint MLP selected). The fee for buying MLP will depend on the balance of assets in the index, with lower fees for assets that the pool has less of (compared to their target weight).
Once you have purchased MLP, it will be automatically staked and you will start earning Escrowed MPX and FTM rewards, which can be viewed on the “Earn” tab. To redeem MLP, simply enter the amount you want to redeem on the Liquidity page with Redeem MLP selected.
The fees for minting/redeeming MLP and swaps will depend on whether the action increases or decreases the balance of assets in the index. For example, if the index has a large percentage of FTM and a small percentage of USDC, actions that increase the amount of FTM in the index will have a high fee, while actions that decrease the amount of FTM will have a low fee. The token weights, or the proportion of each asset in the index, can be viewed on the Dashboard and are adjusted to help protect MLP holders based on the open positions of traders.
If the prices of tokens are increasing, the price of MLP will also increase, even if many traders have long positions on the platform. However, if a large number of traders are shorting a particular asset, and a higher weight is given to stablecoins as a result, MLP holders will have a synthetic exposure to the asset being shorted. For example, if FTM is being shorted and its price decreases, the price of MLP will also decrease. If the price of FTM increases then the price of MLP will increase from the losses of the short positions.
There are risks associated with interacting with any smart contract or blockchain application, including the potential for vulnerabilities in the smart contract code. Some risks include smart contract risks and counterparty risks (if traders make a profit, that comes from the MLP pool), as well as bridged token risk (potential for de-pegging due to bridge security risks).