152 lines
7.3 KiB
XML
152 lines
7.3 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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This product 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 adding leverage to JLP</h3>
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<p className="mb-3 leading-relaxed">
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This product offers a simple way to add leverage to your JLP position.
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It works by borrowing USDC against your deposited JLP and then swapping
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the borrowed USDC to JLP. This leaves you with more JLP than you
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deposited 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 adding leverage to 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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yield.fans
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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 adding leverage to JLP the USDC you borrow gets swapped via Jupiter
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to more JLP. This can incur some slippage resulting in an entry price
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worse than expected.
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</p>
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<p className="mb-6 leading-relaxed">
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So, for leveraging 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">Depositing USDC</h3>
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<p className="mb-6 leading-relaxed">
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Depositing USDC is simply supplying it to the lending pool. Your USDC
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balance will be lent to users leveraging JLP and will continously earn
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the variable interest rate. There are no fees associated with lending
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USDC.
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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 the product
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with bad debt. Users leveraging JLP would lose due to JLP losing value
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and USDC depositors would lose if the JLP was unable to be liquidated in
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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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This product uses 3rd party oracle providers for pricing data. It is
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possible that bad data from these oracle services could result in
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liquidations 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 relies on swapping between JLP and USDC
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without significant price impact. During an extreme market event there
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could be issues liquidating positions effectively. This could affect the
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liquidity available to open/close positions.
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</p>
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<h4 className="mb-1">Code</h4>
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<p className="mb-3 leading-relaxed">
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This product is an integration with the Mango v4 contracts. These are
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audited 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">UI</h4>
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<p className="mb-3 leading-relaxed">
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As the UI changes fairly regularly it's possible for errors to be
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introduced that could temporaily affect your ability to enter or exit
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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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This product relies on the Solana Network and external RPCs to function.
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If these services are down access to your funds will be affected. If
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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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