Farming and Liquidity Mechanism
General Logic
ZEUS Exchange allows users to provide liquidity to the protocol's multi-asset pool by depositing supported assets such as BTC, ETH, USDC, and others. In return, users receive ZLP tokens that represent a proportional share of the pool. LP returns are primarily driven by the pool's net PnL: when traders lose in aggregate, those losses accrue to the pool and increase ZLP value; when traders profit, those gains are paid from the pool.
At the current stage of the protocol, trading fees are not automatically streamed to ZLP holders on-chain. All fees are accumulated in a treasury-controlled fee pool managed by a multisig. A portion of accumulated revenue may be periodically allocated to reward programs and epoch distributions through an explicit treasury decision.
How It Works
1. Depositing assets
To start providing liquidity, the user selects a supported asset and deposits it into the protocol via the Earn page. The deposit is executed as a swap into ZLP at the current ZLP price. From this point, the user's assets are part of the liquidity pool and begin generating fee revenue.
2. Receiving ZLP
At the moment of deposit, the user receives ZLP tokens proportional to their contribution, calculated at the current ZLP price. ZLP is a tokenized representation of your share in the multi asset pool.
3. Earning fees
While holding ZLP, the user's deposited assets are actively used by the protocol to facilitate swaps and leveraged trading. ZLP holders benefit from the pool's net PnL, which increases when traders collectively lose and decreases when traders collectively profit.
All trading fees generated by the protocol - including swap fees, funding fees, and liquidation fees - are accumulated in a treasury-controlled fee pool managed by a multisig. There is no automatic on-chain mechanism that distributes a fixed share of fees to ZLP holders in real time.
Periodically, the protocol may allocate a portion of accumulated fee revenue to reward programs and epoch distributions. The parameters of such allocations are defined through treasury decisions and may change over time.
4. Staking ZLP
After receiving ZLP, users can stake it to participate in additional protocol reward distributions. The dashboard displays two separate balances: ZLP held in the wallet and ZLP actively staked. Staked ZLP participates in reward programs linked to protocol activity and epoch distributions.
5. Exiting the pool
At any time, users can sell ZLP back to the protocol and receive the underlying assets to their wallet. The amount received depends on the current ZLP price at the time of exit and the composition of the pool at that moment. Exit is subject to the standard mint and burn fee.
ZLP Price
The price of ZLP is calculated as follows:
ZLP Price = Total Value of Assets in Pool / Total ZLP Supply
Where:
Total Value of Assets in Pool is the current market value of all tokens held in the pool, calculated using oracle based pricing.
Total ZLP Supply is the total number of ZLP tokens currently in circulation.
The ZLP price floats dynamically and changes as the pool's asset valuation changes and as ZLP tokens are minted or burned. When trading volume and fee generation are high, the value of pool assets tends to increase, which is reflected in a higher ZLP price.
Single Asset Deposits
Unlike traditional liquidity provision models that require users to deposit token pairs such as ETH and USDC simultaneously, ZEUS allows users to deposit a single asset of their choice. There is no requirement to hold or deposit a second paired token.
This design removes the price divergence risk that exists in paired AMM pools, where the value of a user's position can decrease simply because one asset in the pair moves more than the other. On ZEUS, exposure is determined by the composition of the overall multi asset pool rather than a fixed two token ratio.
Risks for Liquidity Providers
Providing liquidity to ZLP involves risk and users should understand this before depositing.
Counterparty risk: ZLP acts as the counterparty to all trades on the platform. When traders are profitable in aggregate, those profits are paid from the pool, which reduces the value of ZLP. When traders lose in aggregate, those losses accrue to the pool, increasing the value of ZLP.
Pool composition risk: The value of the pool is denominated across multiple assets. Price movements in any of the pool's constituent assets affect the overall pool value and therefore the ZLP price.
Smart contract risk: As with any on chain protocol, there is risk associated with smart contract bugs or exploits. Audit reports are available in the Security Audits section.
The dynamic tax mechanism and oracle based pricing are designed to reduce pool imbalance and manipulation risk, but they do not eliminate these risks entirely. Users should carefully consider their risk tolerance before providing liquidity.
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