Providing Capital

The Capital Providers plays a vital role in facilitating Flaex’s operation as well as ensuring the protocol’s solvency. One can think of the Capital Provider Contract as a kind of a Pool Contract in other protocols such as Uniswap, GMX, Open Leverage, dYdX, etc. where the pool provides sufficient liquidity for traders to borrow funds against their collateral. At the same time, it enables its liquidity providers to earn real yield generated from the protocol’s revenue. As crypto market evolves, this model of real yield sharing is becoming more and more preferable to retail investors as it creates true and measurable values to its token/stake holders.

One unique trait of Flaex’s Capital Provider lies in the previously described Flash Swap mechanism. Since traders alone have already been able to fuel their position up to 4x leverage, they only require a relatively smaller amount of funds inside the Vault to fuel their larger leverage orders. This enables Capital Providers to capture much more handsome rewards on their investment and thus creates extremely efficient capital usage. Flaex also applies a supply cap on the total amount of investment eligible, meaning two things:

• Only early Capital Providers are able to join the protocol’s Capital Provider Module to earn real yield.

• Existed Capital Providers are guaranteed of their yield returns based on the protocol’s current business revenue performance.

Without the supply cap, as the protocol grows in public reputation, more and more investors will be able to join freely in order to earn yields while its revenue cannot keep up with the growth of capital supplied, leading to a significantly less yield generated per unit of capital.

Some estimations could be made as below:

For most of other protocols, the pool must be responsible for the total of their amount of Open Interest, let us presume this type of model yields a 100% efficiency in capital usage.

For Flaex, suppose all open interest amount is X, at average leverage of 4X, this renders the whole protocol’s margin ratio at 1.25. The total amount of capital eligible for supply that is capped at margin ratio ≤ 2 is:

Total Supply ≤ 0.6 x X

Compare to other protocols where every unit of open interest amount is fueled by 100% of the liquidity available inside the Pool, Flaex only needs 0.6; which means, at its worst state where the supply cap is reached, the capital efficiency is at least 66.67% more efficient.

The interest rate at any time depends on Flaex's Healthrate and OI:CP ratio.

Use Cases

Capital Providers can diversify their portfolio and expect a high accuracy for rate of return.

Smart contract architectural designs ensure the safety of users’ fund.

Compare to other options such as supplying directly to Lending Protocols, Capital Providers of Flaex earns an extra source of yield generated from trading commission fees on top of the already accrued interest.

Profit Sharing Architecture

The profit sharing model is quite straight-forward.

Apart from the default interest accrued from Flaex’s lending protocol partners, Capital Providers are eligible to another source of income, which is the trading fees generated from other users’ positions:

• 100% of Aave Interest Rates on their stable-coin

• 30% the commission fees generated by Margin Traders.

Ideally, capital providers should earn somewhere between 15-20% APY in real yield, which is a rather impressive rate of returns given the extremely minimal amount of risks.

Inside the Capital Provider Module, a global index is kept track of under the name of f∫ Index. This index is responsible for highly accurate calculation of each user’s eligible yield and embraces the “ever-increasing” model that resembles industry-standard lending protocol architecture.