Leveraged Tokens

Overview

VISP Leveraged Tokens provide streamlined access to leverage, featuring built-in liquidation protection and low, transparent fees. Our automated leveraged tokens simplify trading by utilizing Aave V3 to offer users six distinct strategies for ETH and BTC.

Comparison with Perpetual Futures (Perps)

Both leveraged tokens and perps offer a way for users to amplify their exposure to an asset. However, leveraged tokens differ from perps in their collateral structure:

• Perpetual Futures (Perps): Allow traders to speculate on asset prices without directly holding the underlying asset, using collateral (often WETH, WBTC, or stablecoins) to open long or short positions with synthetic leverage. Traders must maintain sufficient margin to avoid liquidation if the market moves against them.

• Leveraged Tokens: Fully collateralized by the underlying spot assets. For example, the ETH3x product supplies WETH to Aave, borrows USDC, and swaps it for more WETH. This process creates an overcollateralized debt position directly tied to the underlying assets' value.

Features

All VISP leveraged tokens adjust real-time leverage ratios by rebalancing within defined bounds. This automated rebalancing enables liquidation protection and creates a hands-off experience for users.

Leveraged tokens can also be substantially cheaper than perps because the carrying costs on Aave are significantly lower than funding rates on most perp platforms.

Fees

VISP charges annual fees based on the type of product: -1x and 2x products incur a 3.65% annual fee, while 3x products carry a 5.48% annual fee. Additionally, all products are subject to issuance and redemption fees of 0.10%.

Dynamic Costs

Costs associated with utilizing assets within Aave involve the concept of "Cost of Carry," wherein assets deposited accrue interest from borrowers. This results in a spread between the interest earned from deposits and the interest paid for the debt. For example, if ETH2x deposits $1,000 of WETH and borrows $500 of USDC, where ETH deposits earn +2% APY and borrowing USDC costs -5% APY, the resulting net Cost of Carry is -1% APY, leading to a slight reduction in the position's value over time. This Cost of Carry may vary, sometimes favorably and sometimes unfavorably for users, depending on fluctuating borrowing and deposit rates, necessitating regular monitoring via the app.

Regarding rebalancing costs, while VISP itself doesn't impose charges, swapping assets through DEX pools incurs small fees paid to liquidity providers, such as the 0.05% swap fee in PancakeSwap v3 WETH/USDC pools. Moreover, swaps also entail "price impact," wherein larger swaps lead to higher overall prices paid for buys or lower overall prices received for sells, thus gradually reducing the net value of the position over time.