Guide

How to LP on nftperp

LPing on nftperp can be thought of very similarly to any other concentrated liquidity AMM. A prospective LP would begin by choosing which pair to provide liquidity for, followed by a minimum and maximum price to define their range and the amount of WETH/leverage they wish to use. The position composition will change as the mark price of the underlying asset moves, defined as such:

• When mark price is at the absolute center of the range, the position will be comprised of an equal balance of long and short impermanent position, thus having a delta neutral position relative to WETH

• As mark price moves above the center of the range, the position will gradually convert to an impermanent short position. If mark price goes out of range, the position will be fully comprised of a short, which will convert to a market order upon withdrawal and leave the user with an open short position upon closure.

• As mark price moves below the center of the range, the position will gradually convert to an impermanent long position. If mark price goes out of range, the position will be fully comprised of a long, which will convert to a market order upon withdrawal and leave the user with an open long position upon closure.

Providing concentrated liquidity on any platform is a high-risk/high-reward action. A smaller/tighter range will be more capital-efficient and will earn a large sum of fees when mark price is within the range. However, a tiger range will also be subject to greater impermanent loss, taking on directional positions when mark price moves out of range. LPs on nftperp will also earn additional $VNFTP rewards on their positions.