Creating the highest leverage token for maximum capital efficiency at the lowest cost!
IndexZoo's flagship Bear and Bull Leverage token aims to delivery the highest leverage for capital efficiency with the most accurate index tracking. The products starts at 3x leverage and goes up to 5x. Each supported asset will have both Bear (short) and Bull (long) leverage token to use. Simply hold the Bear and Bull in you wallet to get leveraged exposure without worrying about rebalancing, fees and liquidation.
There are 2 leverage token methodologies to achieve different leverage.
3x Leverage Token Using Debt
This method is built on top of the battle-tested TokenSets protocol, and improves upon the well-known IndexCoop FLI 2x series. Using collateralized debt from lending protocol such as Aave and Compound, Zoo innovates to achieve 3x leverage through multiple borrowings. As we know, when the Loan-to-Value (LTV) ratio is at 80%, borrowing once will only yield 1.8x leverage. To get higher leverage, Zoo utilizes recursive borrowing to repeat the cycle of deposit-borrowing-buying-redeposit until targeted 3x leverage is reached. The highest leverage achievable is calculated by 1 / (1-LTV). Hence, with 80% LTV the maximum leverage using our approach is 1 / (1 - 80%) = 5x.
Therefore, targeting a 3x leverage will be a sweet spot for desirable capital efficiency matching CEX leverage products, while preserving sound risk management with on-chain benefits. The products are fully collateralized and supports mint/redeem with underlying assets (e.g. mint 3x ETH Bear with ETH), as well as buy/sell on available DEX pools (e.g. buy 3x wBTC Bull on Sushiswap with DAI). This is a highly scalable product that can be offered on any blockchain with a lending protocol and swap, which most blockchains have.
5x Leverage Token Using Perpetual Futures
In order to get even higher leverage, Zoo pioneers a perpetual futures based leverage token that essentially gets leveraged exposures through margin trading derivative contracts. This method takes advantage the advancement of L2 derivative trading that skyrocketed in volume in 2021. Currently, dYdX runs the biggest layer-2 perpetual futures markets, with cumulative volume over $4.6 billion since its inception in Feb 2021, and a $200 million daily volume in recent days. Zoo is an ecosystem project at Perpetual Protocol, where the V2 Curie perp trading has been live on Optimism since Nov 2021.
Utilizing layer-2 perpetual contract, the leverage token saves significant amounts of gas fee in rebalancing. This enables not only much more frequent rebalancing for an ultra-accurate index tracking, but also cost reduction to the users. The product will be settled in stablecoins (buy or mint 5x ETH Bear using USDC). The 5x leverage token will initially be available on Optimism, powered by Perp Protocol's V2. Going forward, the token may be bridged to other chains of user's like.