I’ve been looking through the blog posts and, since CAP launched over the summer, there’s been plenty of changes to how CAP works, tokenomics, etc. Should we make an updated general info/FAQ page that new people can find and understand easily? I’d be down to go through the blogs/main chat and find relevant info but would need you smart folk to make a sexy webpage for it
Agree, maybe we can start with this FAQ:
What is Cap?
CAP is a protocol that lets you trade the markets with stablecoins. You can trade stocks, cryptos, ETFs, foreign exchange, and more.
Cap’s values are:
What’s the vision?
A global decentralized stock market.
What’s the CAP supply?
100.000 CAP although 20.000 more CAP can be minted if needed. After this, no CAP will ever be minted again, and the only way to own CAP would be to buy it from someone else, for example on the CAP/ETH Uniswap pool.
CAP is the native token underpinning the entire ecosystem. CAP holders will not only be entitled to the global yield generated by the system, but they will also be able to vote on system parameters and asset offerings, among other things. The point of Cap is to create a financial system governed by its users and the CAP token makes that possible.
CAP listing on exchanges
CAP is open source and permissionless. If an exchange wants to list it, they can.
How is Cap different from other protocols?
• There are 0 fees to trade.
• Assets proposed via governance.
• Trades are settled instantly – no need to wait for a block to mine or pay gas.
• Leverage on some markets.
What’s the socialized Profit Correction?
The biggest risk for the CLP is informed traders. An insider on a given stock can make large profits at the expense of LPs, essentially draining the pool. Since Cap is fully decentralized and anonymous, there is no way to detect this behavior or limit trade size.
To address such scenarios, there is the Socialized Profit Correction (SPC) which is a mechanism to protect LPs in case of outsized profit taking by traders. SPC sets the maximum daily drawdown on the CLP at 10%. Any loss beyond that is socialized by adjusting profits made by winning traders.
As an example, let’s say the CLP size is $1M and traders make +$105,000 in aggregate return on a given day. That is $5,000 beyond the CLP’s maximum drawdown. A trader who makes $1,050 on that day (representing 1% of the total profit) sees their profit adjusted by 1% x $5,000 = $50. Their settled profit for the day becomes $1,000 instead of $1,050.
Buyback and Burn
Excess liquidity in the CLP is used to buy back and burn CAP. This occurs every Wednesday at 00:00 UTC.
Excess liquidity is defined as any amount in the CLP above 25% of the average weekly Open Interest. Excess liquidity includes yield but also any funds raised that are not needed to cover expected trader returns.
If there is no excess liquidity available, no buyback occurs.
Perpetuals let you open leveraged long or short positions on certain markets using stablecoins such as DAI. Profits are backed by the Cap Liquidity Pool (CLP), which in turn receives trader losses. Yield generated by the CLP is used to buy back CAP.
Synthetics are crypto-backed instruments that track the value of an underlying asset, like a stock. They let you gain exposure to an asset without needing to own it, and without interacting with the traditional financial system, saving time and money.
Cap Synthetics are non-leveraged, withdrawable ERC-20 tokens that you can purchase using stablecoins. They are backed by the CLP and their price is determined by oracle feeds.
To purchase a synthetic, you send an amount of stablecoins to our Synthetics contract. The contract determines the price of the asset you’re trying to buy based on its oracle feed and mints the equivalent amount of tokens to your address.
To sell a synthetic, you send your asset tokens to our Synthetics contract, which determines the amount of stablecoins to send to you based on the oracle feed. The tokens you send are then burned.
The backend logic is executed entirely in smart contracts and client side code is hosted on IPFS, accessible through the unstoppable domain cap.eth.link .
Nice! That’s a great start for sure. We should definitely add:
-How perpetuals use isolated margins & what that means/how it works
-Add in that the SPC will rarely be used and is just a fail-safe
-Is 200:1 leverage still a go? Definitely should showcase that fact to get degens excited
I’ll post some more later after I go through the blog posts/these were just some immediate thoughts
Great. One noteworthy thing I noticed was two mentions of being “able to provide liquidity to traders to receive high Yields” and “provide liquidity”.
Although these may have been mentioned in the original whitepaper, it is my current understanding that this may no longer be the case upon full launch.
I have asked for clarification multiple times, and each response was consistant with the idea that the CLP would be ‘seeded’ in some fashion, perhaps like how the Beta pool was ‘seeded’ by an angel.
It will be a point of repeated confusion for sure moving forward based on the traditional views/ways people are used to having to provide liquidity in order to benefit from some type of gains.
There will be no further requirement to benefit from the Yields generated, other than to hold Cap tokens for appreciation.
I would really like the “How do we earn with Cap” to be a highlighted article as well. I will work on something to try and help new people to see how easy and simple it is to earn Yields in the Cap ecosystem.
Perhaps we could use this thread as a copy and paste / Drop box type of place to start accumulating some good Q and A, that could easily then be transferred over to another location once we find a suitable home for them?
Agree, once we are comfortable with an initial Q&A, we could post it on a future landing page.
Should we put a link to the roadmap, too? That seems to be accurate enough. Would only need to change the perpetuals section
this is the way. great work friends