OLP token
OLP or Ostium Liquidity Provider token represents the LP share in the LP Market Making Vault.
Minting
LPs deposit USDC into the LP MM Vault. The protocol mints the equivalent number of OLP tokens, at the deposit entry time price, and sends tokens to the same wallet used to deposit.
Burning
Once the withdrawal process is completed, the protocol burns OLP tokens and sends the equivalent amount of USDC to the LP.
Rewards
The MM Vault accumulates these fees from trading activity (diagram here):
50% of protocol opening fee
100% of liquidation reward
By depositing capital into the MM Vault, LPs earn rewards, with fees generated from trading activity. Depositors can estimate their potential earnings through the projected APY displayed on the User Interface or manually derivation through observed protocol flows.
Pricing & Example
In the first phase of the protocol, rewards are compounded directly to increase the value of the OLP token. Sample flow:
Alice deposits 100 USDC into the MM Vault at time t, at which time 1 OLP = 1 USDC. She now has 100 OLP in her wallet.
At time t+1, the value of the MM Vault has grown as a result of compounding gains from trading fees. Now, 1 OLP = 1.10 USDC.
Alice requests to withdraw from the vault at time t+1, which in practice means burning her 100 OLP and redeeming them for their USDC value.
Alice receives 110 USDC, effectively posting a gain of 10%. Alice does not lock in her conversion price when she requests a withdrawal; she receives 110 USDC based on the conversion rate at the actual time of withdrawal itself, post request.
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