Disclaimer: Cube tokens are unaudited and experimental. Use at your own risk and do not deposit more than you’re willing to lose.
Today, Charm launched Cube Tokens, a new leveraged token protocol. It makes it incredibly simple for users to take 3x long/short leveraged positions on BTC, ETH, AAVE, LINK, UNI and YFI without risk of liquidation.
An interface is available at cubes.fi.
Key features
- It’s really simple to take leveraged positions. If you think BTC will go up, you can buy cubeBTC. If you think it’ll go down, you can buy invBTC. As BTC moves, cubeBTC and invBTC will move by a larger amount.
- Cube tokens are represented as ERC-20 tokens so can easily be composed with other protocols.
- Other leveraged tokens tend to lose value over time and shouldn’t be held for a long period. Cube tokens, being a parimutuel pool, are a zero-sum game (aside from protocol fees) so do not suffer from this issue.
- FTX’s leveraged tokens rebalance once a day at 00:02 UTC, so could potentially be frontrun. Binance’s leveraged tokens use a black-box algorithm for rebalancing. Cube tokens, on the other hand, rebalance continuously and in a completely transparent manner.
- 80% of fees from deposits and withdrawals go back to cube token holders. So by holding a cube token, you’ll earn a cut of fees over time! The other 20% goes to the protocol — this value can be modified by governance later on.
Caveats
There are a few things to be aware of before buying cube tokens
- Like all leveraged tokens, cube tokens are high risk products. They can gain or lose large amounts of value in a day.
- Cube tokens are experimental and unaudited and there’s therefore various risks of smart contract bugs.
- Your level of leverage won’t be exactly 3x — it can vary a lot. If lots of people have bought the same cube token, it becomes diluted and the leverage will be lower. It could be lower than 1x or even negative. Furthermore, the upside is capped by the amount available in the rest of the pool. If the pool share of your cube token grows too large, you should consider selling the cube token since the potential downside could be greater than the upside.
- Cube token performance is relative to other cube tokens. If BTC goes up 1%, cubeBTC could still go down if the rest of the pool goes up by more than 1%. To mitigate this, a wide range of tokens will be added to the pool. New cube tokens can be added by governance later on.
How does it work?
If you want to buy cubeBTC (a 3x leveraged token), you can deposit ETH into the pool. If the price of BTC goes up 1%, your pool share goes up 3%. If the price of BTC goes down 1%, your pool share goes down 3%.
So as BTC moves, the value of your cubeBTC moves roughly 3x as much. After each deposit, withdrawal or price move, pool shares are normalized to sum up to 100%.
Read the docs for more details on how the mechanism works.
TVL Cap
As a safety mechanism, a TVL cap of 100 ETH has been added. When this limit is reached, users will not be able to buy cube tokens until someone else has sold their cube tokens.
Join the community!
If you have any questions, feel free to join Charm’s community on Discord. We’d also love to hear any feedback or ideas!
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