AMM model
Overview
ZEUS Exchange is a decentralized trading platform that enables users to trade both spot and perpetual futures with leverage, directly on-chain. The protocol is built on Base Network (Layer 2 on Ethereum) – ensuring low fees, high transaction speeds, and instant execution.
Unlike traditional order book exchanges, ZEUS operates through an enhanced hybrid AMM model, providing improved price stability, reduced slippage, and optimized capital efficiency compared to standard AMM DEXs.
Key components
ZLP (ZEUS Liquidity Pool)
At the core of the ZEUS ecosystem lies the ZLP token, which represents tokenized ownership of a multi-asset liquidity pool. This pool acts as the counterparty to all trades — both in spot and perpetual markets removing the need for order matching or intermediaries.
ZLP Composition
The ZLP pool holds a diversified basket of assets such as ETH, BTC, USDC, and other supported tokens. It serves as the liquidity backbone of the platform, providing depth for trading, leverage, and collateralization.
Dynamic Balance Mechanism
Instead of manually rebalancing pool weights, ZEUS utilizes a Dynamic Tax mechanism: when market demand heavily shifts toward one side (e.g., high ETH longs), swap and mint fees on that asset automatically increase. This discourages further one-sided exposure and incentivizes natural pool rebalancing by traders and LPs.
LP Incentives
Liquidity Providers deposit assets into the ZLP pool and mint ZLP tokens in return. They earn yield from:
Trading fees
Funding fees
Borrow and liquidation fees
A portion of these revenues is allocated to the protocol treasury to support buybacks, sustainability, and reward programs (Epochs & SBT holders).
Oracle-Based Pricing
ZEUS employs a multi-source oracle system to ensure high-precision, manipulation-resistant pricing across all markets.
The pricing framework integrates:
Chainlink Oracles — the primary source of secure and verified on-chain price feeds for all supported assets.
TWAP (Time-Weighted Average Price) — averages price data over time to smooth short-term volatility and mitigate flash loan or oracle manipulation risks.
Bybit & CoinGecko Market Data — off-chain reference sources used to calibrate and validate the ZEUS internal pricing index, maintaining alignment with global spot and derivative markets.
This blended oracle approach provides:
Real-time, tamper-resistant price accuracy.
Liquidation thresholds synchronized with global markets.
Enhanced security and reduced arbitrage risk across DeFi and CeFi ecosystems.
Perpetual Futures with Leverage
ZEUS allows traders to open long or short perpetual positions with up to 50× leverage (subject to risk parameters and asset volatility). Every trade interacts directly with the ZLP pool, which acts as the market counterparty.
Leverage Mechanics
The trader deposits margin (e.g., USDC) as collateral.
ZEUS executes the leveraged position using aggregated oracle pricing.
The position’s PnL (profit or loss) is settled against the ZLP pool.
If losses exceed the collateral value, liquidation occurs automatically — the liquidator is compensated with a fixed fee.
Leverage on ZEUS is fully on-chain, transparent, and instantly executable, combining the efficiency of a CEX with the self-custody and composability of DeFi.
No Order Book — Hybrid AMM Design
ZEUS operates as a hybrid AMM model where the ZLP multi-asset pool serves as the counterparty for all trades — both spot and perpetual. Unlike traditional order book exchanges, trades on ZEUS are executed instantly and permissionlessly against the pool, ensuring continuous liquidity as long as assets are available.
Spot Trading: Users can swap assets (e.g. ETH/USDC) directly with the ZLP pool — no order matching, instant execution, and stable on-chain liquidity.
Perpetual Trading: Traders open leveraged long or short positions against the ZLP pool. The pool dynamically balances exposure between longs and shorts, with funding rates and margin fees maintaining risk neutrality.
Fee Structure on ZEUS
ZEUS Exchange operates on a dynamic, multi-layer fee model, balancing liquidity incentives, market efficiency, and protocol sustainability. All values are expressed in basis points (bps), where 10,000 bps = 100%.
1. Mint / Burn Fees
Parameter
Current
Description
_mintBurnFeeBasisPoints
25 bps (0.25%)
Applied when minting or burning liquidity. Supports protocol treasury and compensates LPs for pool volatility.
2. Swap Fees
Parameter
Current
Description
_swapFeeBasisPoints
25 bps (0.25%)
Applies to swaps between tokens (token ↔ token / token ↔ stable).
_stableSwapFeeBasisPoints
1 bp (0.01%)
Applies only to swaps between stablecoins.
Dynamic Tax
Parameter
Current
Description
_taxBasisPoints
up to 60 bps (0.60%)
Additional fee activated if a transaction worsens token pool imbalance.
_stableTaxBasisPoints
up to 5 bps (0.05%)
Applied for stablecoin pool imbalance.
Dynamic Tax Logic: This mechanism acts as a pool stabilizer – when the ratio of assets in the pool deviates from target levels, additional tax is applied to transactions that worsen the imbalance.
3. Margin Trading Fees
Parameter
Current
Description
_marginFeeBasisPoints
1 bp (0.01%)
Charged when opening a margin position, calculated from position size.
_executionFee
0.00018 ETH
Fixed fee paid to keeper for executing a trade, covers gas cost.
4. Funding Rate (Margin Maintenance Fee)
Parameter
Current
Description
_fundingRateBasisPoints
1 bp/hour (0.01%/hour)
Hourly margin fee based on position size. Deducted from collateral upon closure, not in real time.
Details:
Charged hourly for as long as the position remains open.
Separate rates can be configured for tokens and stablecoins.
The fee does not accrue in real-time — it is settled upon closure, directly reducing the remaining collateral.
Parameter
Current
Description
_liquidationFeeUsd
$5
Fixed fee paid to the liquidator for executing a forced liquidation.
Example — Opening a 10× Long on ETH
A trader opens a 10× long position on ETH, using BTC as the purchase token, with $1,000 collateral.
1. Swap Phase
Swap $1,000 BTC → $1,000 WETH • Swap Fee: 0.25% = $2.50 • Dynamic Tax (if pool unbalanced): up to 0.60% = $6.00
2. Position Opening
Position Size = $10,000 • Margin Fee: 0.01% = $1.00 • Execution Fee: 0.00018 ETH
3. Funding Accrual
Funding Rate: 0.01%/hour on $10,000 = $1.00/hour Charged upon closure, deducted from collateral.
4. Liquidation Fee
If liquidated before manual closure → $5 fixed.
5. SBT Mint Fee
Parameter
Current
Description
_sbtMintFeeUsd
$10
One-time fee to mint a Soulbound Token (SBT). Required to participate in Epochs and earn 25% profit share from protocol revenue.
6. Revenue Routing
Not all fees are retained by the protocol. Distribution is as follows (configurable by governance):
Liquidity Providers (LPs): receive base trading and mint/burn fees as yield.
Keepers: receive execution and liquidation fees.
Protocol Treasury: collects margin, borrow, and funding fees — used for sustainability, buybacks, and reward programs (Epoch & SBT holders).
Liquidity
Liquidity providers (LPs) deposit assets into the ZLP pool and receive ZLP tokens in return. These tokens represent a share in the pool and allow LPs to earn fees from trading, funding, and liquidations.
Earning Mechanisms for LPs
Trading Fees: LPs earn a share of the 0.1% trading fee collected from both spot and perpetual trading.
Funding Fees: LPs receive funding fees paid by leveraged traders to maintain their open positions.
Liquidation Fees: A portion of liquidation fees goes to the liquidity pool, benefiting all LPs.
Risk for LPs
As with any AMM-based system, there is the risk of impermanent loss, where LPs may lose value if the price of the assets in the pool changes significantly. Additionally, LPs are exposed to the risks of leveraged positions in the pool. If too many leveraged positions are liquidated, the pool might sustain losses.
However, ZEUS’s multi-asset pool structure mitigates some of this risk by allowing LPs to earn fees and funding payments from traders, balancing the potential for impermanent loss.
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