🗺️How ZLP Works
Liquidity Pool
The ZO Perpetuals exchange uses a trader-to-LP model, meaning traders borrow tokens from the ZLP Pool to open leveraged positions.
Instead of periodic funding payments between long and short traders, ZO implements an hourly borrow fee mechanism.
Traders pay these fees to the pool based on the amount of tokens they’ve borrowed. This helps secure the balance of the pool’s assets and compensates liquidity providers for the use of their capital.
Add / Remove Liquidity to ZLP
Adding Liquidity
Liquidity providers can acquire ZLP by contributing supported assets via ZO Swap.
Increases Total Value Locked (TVL), which boosts trading liquidity.
Deposited assets are allocated to the appropriate pool.
TVL is re-priced in USD at the time of deposit.
ZLP is minted and distributed based on the current price determined by underlying assets.
Removing Liquidity
ZLP can be redeemed into supported tokens.
This burns the ZLP token and releases assets from the pool.
Alternatively, ZLP can be transferred or traded on secondary markets.
Yield Generation
Action
Fee
Opening a Position
20-40 BPs
Closing a Position
20-40 BPs
Swap Fee (Mint/Burn ZLP)
0–100 BPS (based on weight)
Borrow Rate
Dynamic
75% of fees go into the pool.
Fees are settled when position is opened or closed.
ZO generates yield for ZLP holders through fees collected from trading activity.
Yield Calculation Example
Assumptions:
Daily Trading Volume = $50M
Fee Rate = 0.06%
Revenue Share to Pool = 75%
$50,000,000 x 0.06% x 75% = $22,500/day in pool fees
Your share:
Contribution = $1,000
Pool TVL = $4,000,000
Pool Share = 0.025%
$22,500 x 0.025% = $5.625/day
ZLP Fee Distribution & APR
Fee Distribution
Occurs when position is opened or closed
75% of realized fees are added to the pool.
25% is retained as a protocol fee.
Weekly APR Calculation
APR is updated weekly using the following logic:
if current_time > (last_updated + 1 week): time_diff = current_time - last_updated apr_bps = (realized_fee_usd * YEAR_IN_SECONDS * 10,000) / (pool_usd_value * time_diff)
APR is expressed in basis points (BPS).
Risks of Holding ZLP
1. Bull Market Performance
ZLP may underperform assets like SOL, ETH, or BTC due to the mixed asset nature of the pool (stable + volatile).
2. Trader PnL
Trader profits and losses affect the pool:
Long Profitable Trade
Pool loses token quantity, but underlying token price rises (USD value remains stable).
Short Profitable Trade
Pool loses stable coins without offsetting token appreciation (USD value drops).
⚠️ Yes, ZLP can go down in value. If trader profits + asset depreciation > fees generated, the pool’s value decreases.
3. Token Volatility & Fees
ZLP includes both stable and volatile tokens.
Value of withdrawn tokens may be less than deposited.
Entry/exit fees can reduce returns, especially for short-term holdings.
Pool Weightage & Rebalancing
Each token has a target weight, which helps balance the pool.
Maintaining Target Weight
Swap (mint/redeem) fees adjust dynamically:
Token > target weight
Deposit fee ↑, Withdraw fee ↓
Token < target weight
Deposit fee ↓, Withdraw fee ↑
🧮 Goal: Encourage actions that return the pool closer to target weights.
Weighted Swap Fees Mechanism
A token’s weight can deviate from its target, but it may incur high fees
Example:
Target USDC Weight = 26%
Allowed Range = 20.8% to 31.2%
Above 31.2% → USDC deposits incurs high fees (~100bps)
Below 20.8% → USDC withdrawals incurs high fees (~100bps)
🛡️ Purpose: Prevent destabilization during black swan events or depegs.
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