Liquidity Points System in Quantex

In Quantex, we have redesigned the traditional liquidity capping and premium system to better align with our cross-chain liquidity management strategy. Instead of setting caps and calculating premiums, we introduce a dynamic points system that rewards liquidity providers based on their contributions and the protocol's overall performance.

Introduction to Liquidity Points

Liquidity Points (LP Points) are awarded to liquidity providers (LPs) as an incentive for their participation in the protocol. These points are accrued based on the volume and duration of liquidity provided, as well as the strategic importance of the liquidity placement across different chains.

How the Points System Works

Dynamic Allocation of Liquidity

• Liquidity is dynamically allocated across various chains and pools based on historical data, such as trading volume and volatility. This ensures optimal utilization and minimizes price impact when bridging liquidity.

Earning Liquidity Points

• Contribution-Based: LP Points are awarded based on the amount of liquidity a user provides and the duration it remains in the pool.

• Strategic Placement: Additional points are given for placing liquidity in pools that need it most, ensuring a balanced and efficient distribution across the protocol.

• Performance-Based: LP Points can also be awarded based on the overall performance of the liquidity provided, such as the volume of trades it facilitates and the fees it generates.

Points Calculation

• Points are calculated using a formula that considers the user’s liquidity contribution, the duration of the contribution, and the strategic need for liquidity in specific pools.

• Example Formula: $LP(Points) = (LiquidityProvided * Duration / Total Liquidity InPool) * Strategic Multiplier$

• The Strategic Multiplier is a factor that increases the LP Points awarded to liquidity providers who add liquidity to pools that are strategically important for the protocol. Pools that are underfilled or in high demand will have a higher Strategic Multiplier to attract more liquidity.

Practical Example of the Points System

• Alice’s Contribution: Alice provides $100,000 in liquidity to an ETH/USDT pool.

  The pool is currently underfilled, and the Strategic Multiplier is set at 1.5.

  Alice keeps her liquidity in the pool for 30 days.

  Calculation: LP Points = ( [$100,000 * 30 days] / 10,000,000) * 1.5 = 450 LP Points

• Bob’s Contribution: Bob provides $50,000 in liquidity to a WBTC/USDT pool. This pool is in high demand with a Strategic Multiplier of 1.2. Bob’s liquidity remains in the pool for 45 days.

  Calculation: LP Points = ( [$50,000 * 45 days] / 5,000,000) * 1.2 = 540 LP Points

Benefits of Holding LP Points

Profit Sharing

• A percentage of the protocol's monthly profit is distributed among all points holders.

• Example: If the protocol earns $5,000 in a month and 30% of the profit is allocated to points holders

  Total Points for the Month: 1,000 Amount to be Distributed: $5,000 * 0.3 = $1,500 Individual Share for 300 Points: