Hybrid Liquidity and Pricing 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 deployed on Base, a layer 2 network on Ethereum that provides low fees and fast transaction finality.
Unlike traditional order book exchanges, ZEUS does not match buyers and sellers against each other. Instead, all trades are executed against a shared multi asset liquidity pool using oracle based pricing. This design removes the need for a central counterparty or order matching engine while maintaining continuous liquidity for spot and leveraged markets.
Key components
ZLP (ZEUS Liquidity Pool)
At the core of the ZEUS protocol is the ZLP token, which represents proportional ownership of a multi asset liquidity pool. The 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 including ETH, BTC, USDC, and other supported tokens. It serves as the liquidity backbone of the platform, providing depth for trading, leverage, and collateralization. The composition of the pool is monitored continuously, and the dynamic fee mechanism described below helps maintain target allocation ratios over time.
Dynamic Balance Mechanism
Instead of relying on manual rebalancing, ZEUS uses a dynamic tax mechanism to maintain pool stability. When demand shifts heavily toward one asset or one side of the market, swap and mint fees on that asset automatically increase. This discourages further one sided exposure and creates natural incentives for traders and liquidity providers to help rebalance the pool.
LP Incentives
Liquidity providers deposit assets into the ZLP pool and receive ZLP tokens in return. These tokens 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 the value of ZLP; when traders profit in aggregate, those gains are paid from the pool.
At the current stage of the protocol, all trading fees (including swap fees, funding fees, and liquidation fees) are accumulated into a treasury-controlled fee pool managed by a multisig. There is no automated on-chain streaming of fees directly to LP holders.
A portion of accumulated protocol revenue may be periodically allocated to reward programs and epoch distributions through an explicit treasury decision. A dedicated on-chain module for automated fee routing to liquidity providers may be introduced in a future protocol upgrade.
Oracle Based Pricing
ZEUS uses a multi-source oracle system to provide manipulation-resistant, high-precision pricing across all supported markets. The pricing framework integrates two complementary data sources.
Chainlink Oracles serve as the primary source of verified on-chain price feeds for all supported assets. Multiple recent price rounds can be sampled to derive conservative minimum and maximum bounds, adding an extra layer of protection against short-term anomalies and outliers.
FastPriceFeed is maintained by an off-chain keeper that computes a blended spot price based on data from Bybit and MEXC. This price is periodically pushed on-chain and cross-checked against the Chainlink reference. If the deviation between FastPriceFeed and Chainlink exceeds a configurable threshold - or if authorized signers flag an anomaly - the protocol automatically falls back to Chainlink pricing with an additional safety spread applied.
This two-layer design delivers real-time, tamper-resistant price accuracy across all market conditions. Liquidation thresholds track global market dynamics rather than on-chain AMM prices, which are explicitly excluded during liquidation checks to prevent manipulation.
Perpetual Futures with Leverage
ZEUS allows traders to open long or short perpetual positions with up to 30x leverage, subject to risk parameters and asset volatility. Every trade interacts directly with the ZLP pool, which acts as the market counterparty throughout the life of the position.
Leverage Mechanics
The trader deposits collateral (for example, USDC or ETH) to open a position.
ZEUS executes the leveraged position using aggregated oracle pricing.
Profit and loss are settled against the ZLP pool when the position is closed.
If losses exceed the collateral value before the trader closes the position, liquidation occurs automatically. The liquidator receives a fixed fee for executing the on chain closure.
Leverage on ZEUS is fully on chain, transparent, and executable without a custodial intermediary.
Pool-Based Execution Model
ZEUS does not rely on a central limit order book or an RFQ system. There is no matching engine pairing buyers and sellers directly - every trade is executed against the ZLP liquidity pool at oracle-derived prices.
The protocol supports three primary execution modes:
Spot trades are direct asset swaps against the ZLP pool. Execution occurs at the current oracle price, subject to a base swap fee and an optional dynamic tax that depends on the pool's composition and target weights.
Perpetual trades are leveraged positions where the ZLP pool acts as the sole counterparty. Net exposure per asset is managed through a combination of fees, funding rates, and risk caps — not through opposing user orders.
Limit and trigger orders are submitted to an on-chain order registry with a specified trigger price and execution fee. When market conditions satisfy the trigger criteria, a keeper executes the order against the pool on the user's behalf. These are not peer-to-peer matches - they are deferred executions against the same pool-based liquidity.
By consolidating spot and perpetual liquidity into a single multi-asset pool and pricing all trades through the oracle framework, ZEUS functions as an on-chain automated market maker for perpetual futures rather than a traditional order-book DEX.
Fee Structure
ZEUS Exchange uses a dynamic, multi layer fee model designed to balance liquidity incentives, market efficiency, and protocol sustainability. All values below are expressed in basis points (bps), where 10,000 bps = 100%.
1. Mint and Burn Fees
Mint / Burn fee
25 bps (0.25%)
Applied when minting or burning ZLP tokens. Supports the protocol treasury and compensates LPs for pool volatility exposure.
2. Swap Fees
Token swap fee
25 bps (0.25%)
Applies to swaps between tokens (token to token, token to stablecoin).
Stablecoin swap fee
1 bp (0.01%)
Applies only to swaps between stablecoins.
Dynamic Tax
Dynamic tax (tokens)
up to 60 bps (0.60%)
Additional fee applied when a transaction worsens the token imbalance in the pool.
Dynamic tax (stables)
up to 5 bps (0.05%)
Applied when a transaction worsens the stablecoin balance in the pool.
The dynamic tax acts as a pool stabilizer. When the ratio of assets in the pool deviates from target levels, the additional fee is charged on transactions that increase the imbalance. Transactions that improve pool balance are not subject to this additional charge.
3. Margin Trading Fees
Margin fee
10 bp (0.1%)
Charged when opening a leveraged position, calculated as a percentage of the total position size.
Execution fee
0.00018 ETH
Fixed fee paid to the keeper for executing the trade on chain. Covers network gas costs.
4. Funding Rate
Funding rate
8h interval (utilization‑based)
Fee is charged every 8 hours based on pool utilization. The maximum funding fee is 0.01% per interval, but it is usually lower (for example, 0.005% at 50% pool utilization).
Key details:
Charged hourly for as long as the position remains open.
Separate rates can be configured for volatile tokens and stablecoins.
The fee does not reduce collateral in real time. It accrues and is settled in full when the position is closed or liquidated.
5. Liquidation Fee
Liquidation fee
$5 (USD equivalent)
Fixed fee paid to the liquidator for executing a forced on chain closure.
6. SBT Mint Fee
SBT mint fee
$10 (USD equivalent)
One time fee to mint a Soulbound Token. Required to participate in Epochs and to be eligible for the 25% protocol revenue share.
Fee Calculation Example
Opening a 10x Long on ETH using BTC as collateral, with $1,000 collateral
Step 1. Swap Phase
The collateral is first converted from BTC to WETH before the position is opened.
Swap fee: 0.25% of $1,000 = $2.50
Dynamic tax (if pool is imbalanced at time of trade): up to 0.60% = up to $6.00
Step 2. Opening the Position
Position size: $10,000 (10x leverage on $1,000 collateral)
Margin fee: 0.1% of $10,000 = $10.00
Execution fee: 0.00018 ETH (paid to the keeper)
Step 3. Funding Accrual While Position is Open
Funding rate: max 0.01% per 8-hour interval on $10,000 = $1.00 per 8h (max)
At 50% pool utilization (typical): ~0.005% per interval = $0.50 per 8h (~$1.50/day)
Accrues and is settled when the position is closed.
Step 4. Liquidation (if applicable)
If the position is liquidated before manual closure: fixed $5.00 fee paid to the liquidator.
The fee structure is designed to serve three goals simultaneously: maintaining pool balance through dynamic taxation, sustaining protocol operations through margin and funding fees, and rewarding participants - keepers, SBT holders, and LPs - through transparent revenue routing.
Together, these mechanisms create a self-regulating market environment where liquidity depth, price accuracy, and incentive alignment reinforce each other, enabling efficient on-chain trading at any scale.
Revenue Routing
Not all protocol fees flow to the same destination. Distribution is as follows and may be adjusted through governance:
Keepers receive execution fees and liquidation fees for performing on chain operations.
Protocol treasury collects margin fees, funding fees, and a portion of other revenues. These funds are used for protocol sustainability, token buyback programs, and reward distributions through Epoch campaigns and SBT holder allocations.
Liquidity Provider Risk
Providing liquidity to ZLP involves risk. Liquidity providers act 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, which increases the value of ZLP.
Additional risks include pool imbalance during extreme market conditions, smart contract risk, and the potential for large coordinated positions to create temporary directional exposure for the pool. ZEUS mitigates these risks through the dynamic tax mechanism, oracle based pricing with multiple data sources, and configurable risk parameters including maximum position sizes and leverage caps.
Liquidity providers should carefully consider these risks before depositing assets into the ZLP pool.
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