155 lines
7.4 KiB
XML
155 lines
7.4 KiB
XML
const HowItWorks = () => {
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return (
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<div className="mt-6 rounded-lg border-2 border-th-fgd-1 bg-th-bkg-1 p-6">
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<h2 className="mb-1">Before you jump in</h2>
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<p className="mb-6 leading-relaxed">
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Boost! is high risk. Make sure you understand how it works before
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risking any funds.
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</p>
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<h3 className="mb-1">The basics of JLP</h3>
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<p className="mb-3 leading-relaxed">
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JLP is the liquidity provider token for Jupiter Perps. It represents a
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pool of assets that traders borrow from to open leveraged perp positions
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on the Jupiter platform.
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</p>
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<p className="mb-6 leading-relaxed">
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Liquidity providers can deposit assets like BTC or SOL into the pool and
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receive JLP in return. To incentivize this liquidity, JLP earns 70% of
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all perp trading fees. This is automatically accrued in the price of JLP
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over time and is represented as an APR.
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</p>
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<h3 className="mb-1">The basics of boosting JLP</h3>
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<p className="mb-3 leading-relaxed">
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Boost! offers a simple way to add leverage to your JLP position. It
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works by borrowing USDC against your deposited JLP and then swapping the
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borrowed USDC to JLP. This leaves you with more JLP than you deposited
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and a borrowed amount of USDC.
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</p>
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<p className="mb-6 leading-relaxed">
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The idea is to increase your return by harvesting more of the native
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yield of JLP. So... borrow USDC to buy JLP to get more exposure to the
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JLP yield. As long as your borrow costs are less than the extra JLP
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yield you make a profit.
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</p>
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<h3 className="mb-1">Is boosting JLP always profitable?</h3>
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<p className="mb-3 leading-relaxed">
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No. For one, there is a real risk of liquidation. If the price of JLP
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drops below your liquidation threshold you will lose some or all of your
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JLP.
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</p>
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<p className="mb-3 leading-relaxed">
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There are also fees and costs for borrowing USDC that will affect your
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positions profitability.
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</p>
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<h4 className="mb-1">USDC Borrow Rate</h4>
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<p className="mb-3 leading-relaxed">
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This variable APR can change significantly and frequently depending on
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the ratio or USDC deposits and borrows. It is charged continuosly on the
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balance of your USDC borrow and paid to USDC depositors (lenders) on
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Boost!.
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</p>
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<h4 className="mb-1">USDC Loan Origination Fee</h4>
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<p className="mb-3 leading-relaxed">
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This is a one-time, 50 basis points (0.5%) fee applied to the balance of
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your USDC borrow and paid to Mango DAO.
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</p>
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<h4 className="mb-1">JLP Collateral Fee</h4>
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<p className="mb-3 leading-relaxed">
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This is charged on your JLP collateral once every two days as insurance
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for JLP suffering a catastrophic failure resulting in bad debt. It will
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reduce the size of your JLP position over time. The fee accrues to Mango
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DAO.
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</p>
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<p className="mb-3 leading-relaxed">
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The collateral fee is a dynamic formula that uses a fixed Annual
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Percentage Rate (APR) of 41%. This rate is then multiplied by the ratio
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of your USDC liabilities (the amount you've borrowed) against your
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"weighted" JLP deposits (the value of your position adjusted
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by a factor between 0 and 1). The JLP weight is currently set at 0.9.
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</p>
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<p className="mb-3 leading-relaxed">
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The key aspect of this fee is its dynamism; it scales with your
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position's proximity to the liquidation price. Positions closer to
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liquidation are subjected to a higher fee, reflecting increased risk,
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while positions further from liquidation incur a lower fee.
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Consequently, the more leverage you take on the more collateral fees
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you'll pay.
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</p>
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<h4 className="mb-1">Position Entry Costs</h4>
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<p className="mb-3 leading-relaxed">
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When boosting JLP the USDC you borrow gets swapped via Jupiter to more
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JLP. This can incur some slippage resulting in an entry price worse than
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expected.
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</p>
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<p className="mb-6 leading-relaxed">
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So, for boosting JLP to be profitable the extra yield needs to be
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greater than these costs. It can also take some time for your position
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to be in profit because of the upfront fees paid to borrow USDC.
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</p>
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<h3 className="mb-1">Boosting USDC</h3>
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<p className="mb-6 leading-relaxed">
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Boosting USDC is simply supplying it to the lending pool. Your USDC
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balance will be lent to JLP boosters and will continously earn the
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variable interest rate. There are no fees associated with lending USDC.
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</p>
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{/* <p className="mb-3 leading-relaxed">
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There are no fees associated with lending USDC but there are risks. If
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there was a catastrophic failure in JLP or Boost! you could lose all of
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your funds.
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</p> */}
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<h3 className="mb-1">Risks</h3>
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<p className="mb-3 leading-relaxed">
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The following risks are non-exhaustive.
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</p>
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<h4 className="mb-1">JLP</h4>
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<p className="mb-3 leading-relaxed">
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JLP's value relies on complex market dynamics and smart contract
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code. This exposes it to multiple potential failure points that could
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result in total loss of funds.
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</p>
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<p className="mb-3 leading-relaxed">
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If JLP were to have a large depegging event it could leave Boost! with
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bad debt. JLP boosters would lose due to JLP losing value and USDC
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depositors would lose if the JLP was unable to be liquidated in time.
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</p>
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<h4 className="mb-1">Oracles</h4>
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<p className="mb-3 leading-relaxed">
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Boost! uses 3rd party oracle providers for pricing data. It is possible
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that bad data from these oracle services could result in liquidations
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and/or total loss of funds.
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</p>
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<h4 className="mb-1">Liquidity</h4>
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<p className="mb-3 leading-relaxed">
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Opening and closing positions on Boost! relies on swapping between JLP
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and USDC without significant price impact. During an extreme market
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event there could be issues liquidating positions effectively. This
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could affect the liquidity available to open/close positions.
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</p>
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<h4 className="mb-1">Boost! Code</h4>
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<p className="mb-3 leading-relaxed">
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Boost! is an integration with the Mango v4 contracts. These are audited
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by{' '}
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<a href="https://osec.io/" rel="noopener noreferrer" target="_blank">
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OtterSec
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</a>{' '}
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on every release. It is still possible for exploitable vulnerabilities
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to exist that could result in total loss of funds.
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</p>
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<h4 className="mb-1">Boost! UI</h4>
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<p className="mb-3 leading-relaxed">
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As the Boost! UI changes fairly regularly it's possible for errors
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to be introduced that could temporaily affect your ability to enter or
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exit positions.
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</p>
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<h4 className="mb-1">Solana Network and RPCs</h4>
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<p className="mb-3 leading-relaxed">
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Boost! relies on the Solana Network and external RPCs to function. If
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these services are down access to your funds on Boost! will be affected.
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If this coincides with a market event you could lose funds.
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</p>
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</div>
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)
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}
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export default HowItWorks
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