Advanced: Customized Proportion
Last updated
Last updated
While providing liquidity, deposited DAI will mint Long and Short tokens in a 1:1 proportion. However, directly putting all Long and Short tokens into the pool might change the current proportion of Long and Short, which causes the price to change.
It would then create a potential arbitrage opportunity whenever someone provides fresh liquidity. To prevent such situations, an advanced function: "customized ratio" is invented. With this function, liquidity providers may customize the input proportion of Long and Short tokens to avoid potential losses.
Given the conditions of 10,000 Long tokens + 3,000 Short tokens in the pool, a new liquidity provider just minted 100 Long tokens + 100 Short tokens with 100 DAI.
To provide liquidity without changing current prices, the proportion in the pool must remain the same. Therefore, only 100 Long tokens + 30 Short tokens can be added to the pool. This will then leave 70 Short tokens on the hand of the liquidity provider, which can be directly traded back into DAI or redeem after expiration.
*There's no frontend interface for this advanced function. To add liquidity by arbitrary proportion, you need to call mint() and depositLP function on etherscan.io manually.
