All blogposts
2x Leverage Tokens FAQ
2x Leverage Tokens FAQ
All your questions about the new 2x leverage tokens answered.
3/20/2024
Index Coop
Content
Note to existing ETH2x-FLI or BTC2x FLI users: You are not required to take any action at this time. If you would like to exit your ETH2x-FLI or BTC2x-FLI position, you can see detailed instructions here.
How can I buy ETH2x or BTC2x?
Non-restricted persons can buy ETH2x and BTC2x tokens in the Index Coop App. Based on the amount you intend to buy or sell, the app will recommend the optimal path: Flash Mint (which issues new 2x token units) or DEX Swap (powered by 0x). At launch, there may not be DEX liquidity for the new 2x tokens, so Flash Mint is likely to be the recommended path.
If DEX liquidity is provided, then third-party DEX aggregators like CoW Swap and 1inch can also be used to trade 2x tokens.
What are the benefits associated with holding ETH2x or BTC2x?
In addition to the time-tested features of the legacy FLI tokens–liquidation protection, automated rebalancing, persistent leverage–these new 2x tokens are more gas-efficient to issue and redeem and have upgraded risk automation.
You can find more info on all these benefits in the introductory article for ETH2x and BTC2x.
What are the costs associated with holding ETH2x or BTC2x?
ETH2x and BTC2x charge an annualized streaming fee of 3.65% or 365 bps. There is also a 0.10% or 10 bps issuance and redemption fee. Token holders also pay carrying costs attributed to the underlying collateralized debt positions in Aave V3.
All fees on the legacy FLI tokens have been disabled, so FLI holders do not pay “double fees”.
How long should I hold ETH2x or BTC2x tokens?
Unlike standard index products, ETH2x and BTC2x are not intended to be held for extended periods of time. The primary reason for this is volatility drift, a naturally occurring phenomenon in leverage products that frequently rebalance; a deep dive article on volatility drift and how it affects 2x token holders will be published imminently. For this reason, it is recommended that holders manage their positions in daily or weekly terms, not monthly or yearly terms.
Do I need to do anything with my ETH2x-FLI or BTC2x-FLI?
If you are a FLI holder, you do not need to do anything to maintain 2x exposure to ETH or BTC. The new 2x tokens are operating “under the hood” of the legacy FLI tokens, fully enabled with liquidation protection, automated rebalancing, and persistent leverage on Aave V3.
What if I want to exit my ETH2x-FLI or BTC2x-FLI position?
To exit your legacy FLI position, you can “unwrap” your FLI tokens for the underlying 2x tokens. From there, you may flash redeem or swap the 2x tokens in exchange for your preferred output token; the Index Coop App will recommend the optimal path based on liquidity conditions.
A guide for unwrapping FLIs and redeeming 2x tokens is available here.
What if I want to provide liquidity for ETH2x or BTC2x?
Anyone can provide liquidity for ETH2x or BTC2x due to the permissionless nature of issuance and redemption and the permissionless nature of DEXs. As of now, the following liquidity pools have been initialized on Uniswap V3:
ETH2x/WETH (30bps): https://info.uniswap.org/#/tokens/0x65c4c0517025ec0843c9146af266a2c5a2d148a2
BTC2x/WBTC (30bps): https://info.uniswap.org/#/tokens/0xD2AC55cA3Bbd2Dd1e9936eC640dCb4b745fDe759
A guide for programmatic issuance and redemption is also available here for liquidity providers and bot operators. Index Coop does not provide liquidity for ETH2x or BTC2x, so it is up to the market to determine where / when / why / how much liquidity is provided for these leverage tokens.
Dive deeper
Watch, read, and learn everything you need to master our leverage tokens.
Subscribe to our newsletter
Join over 6,000 subscribers in receiving weekly updates about our products, DeFi, and the onchain structured products space.
FAQs
Index Coop yield tokens simplify earning yield in DeFi by automating complex strategies and diversifying across protocols. They are user-friendly and cost-efficient, appealing to both new and seasoned DeFi users.
Leverage tokens automate a leveraged position by utilizing onchain money markets like Aave or Morpho to borrow funds, amplifying a user's exposure to an asset without requiring manual management. The token's smart contracts autonomously handle the borrowing, lending, and rebalancing of assets, maintaining a consistent leverage ratio despite market fluctuations. This automation eliminates the complexities of collateral management and liquidation risks, while also charging low, transparent fees that avoid expensive funding rates often charged by perps.
Index Coop is a decentralized autonomous organization (DAO) that specializes in creating and maintaining onchain structured products. Index Coop aims to democratize access to the crypto market, empowering everyone to participate in the growing digital asset ecosystem with ease.
No, yield automatically compounds and accrues to the token price. The value of the tokens you hold in your wallet will simply go up over time without the need to claim or compound rewards.
Index Coop products protect you from liquidation with automated risk management that rebalances assets to maintain a target leverage ratio that avoids liquidation.
INDEX is the ERC-20 governance token on Ethereum for Index Coop. INDEX empowers its holders to participate in decision-making processes that shape the future of Index Coop.
Yes, all Index Coop products are instantly redeemable for their underlying value at all times.
Yes, all Index Coop smart contracts have been audited by leading independent security firms such as OpenZeppelin, ABDK, Isosiro, & more. There is also an active bug bounty program through ImmuneFi. Audit information is published in the docs here.
Streaming fees (an annual fee paid continuously block-by-block), mint and redeem fees (only on leverage tokens), and borrow costs (interest paid to borrow funds from onchain markets when using leverage).