Read time: 5 minutesJuly 19, 2022

Mycelium Perpetual Swaps

Product OverviewMycelium Perpetual Swaps

Mycelium Perpetual Swaps brings extremely low-cost, easy-to-use derivatives to Arbitrum, the layer 2 scaling solution built on top of Ethereum. With no price impact and low fees (0.09% entry and exit fees), traders can go long and short assets in the MLP pool, on up to 30x leverage and swap assets within the pool without moving the market. The pool is composed of high quality crypto-assets and stablecoins. Mycelium Perpetual Swaps launched in August 2022 and features a jam-packed roadmap bringing new levels of capital efficiency to traders, increased yield for LPs and the ability to trade long-tail assets while preventing against toxic order-flow.

Trade derivatives with liquidity, leverage, and low fees = Trade with Mycelium Perpetual Swaps.

Product Description

Traders on Mycelium Perpetual Swaps can perform asset swaps on ETH, BTC, LINK, UNI, CRV, BAL and FXS and a variety of stable coins. They can also leverage trade these assets in both directions by utilising the assets in the pool.

When entering a long on Bitcoin for example, a trader is ‘renting out’ the upside in Bitcoin, from the MLP pool.

When entering a short on Bitcoin, a trader is ‘renting out’ the upside of the Stablecoins versus Bitcoin, from the MLP pool.

MLP Pool

The MLP pool is a multi-asset pool that supports trading and allows users to go long/short specific assets in the pool and/or swap pools assets. This pool earns liquidity provider (LP) fees from market making, swaps and leverage trading. 70% of these fees are distributed back to MLP holders.

LP’s can ‘mint’ MLP tokens, which represent shares in the MLP pool, by depositing any of the index assets to the pool. They can redeem any index asset by burning their MLP holdings. The fees associated with buying MLP vary depending on which of the MLP index assets are currently underweight/overweight. If any index asset is underweight the fees for minting MLP by depositing this asset is lower and hence incentivised.

The token weights in the pool are adjusted to help hedge the holders of MLP against the open positions traders have. So, if a large number of traders are long Bitcoin, the MLP pool would have a higher Bitcoin weight and vice versa with stablecoins if a large proportion are short.

Instead of the standard Automated Market Maker model (AMM) (x*y=k), the mechanism uses Oracle price feeds to set the price at which trades are executed. Furthermore, LP’s are protected against impermanent loss seen in the traditional AMM model.

The value of the MLP token is determined by the changing value of the index tokens inside of it, making it in a way, a diversified index of high quality crypto assets that also generates significant yield for holders.

The MLP pool is essentially a liquidity pool that acts as the counterparty to leverage traders on the exchange. This means that if traders make a profit, MLP holders make a loss and vice versa.

Empirical analysis of the cumulative Profit and Loss statement of traders on competitor exchanges shows that traders on average lose money over time. This would benefit MLP holders.

MLP’s Staking Rewards Program

Mycelium Perpetual Swaps will be boosting MLP returns to a Targeted Yield of 25% APR through a combination of MYC distributions and ETH earned by fees generated for the first month of the Perpetual Swap product’s operation. The empirical APR for LPs is ~20-40%. If the ETH rewards APR is greater than the targeted APR, no MYC will be distributed.

Given the volatility of TVL in the liquidity pool, it will be difficult to consistently deliver the targeted APR to liquidity providers over the incentivised period. It is possible that some weeks will undershoot the target, and some weeks will overshoot the target.

Fees and Revenue Generation

The Mycelium Perpetual Swap protocol generates revenue by charging fees on the opening and closing of trades and also a “borrow fee” that is deducted every hour a leveraged position is open.

There is a very low trading fee of 0.09% of your position size, which is incurred when opening a position and closing a position. The borrow fee is the fee that is paid to the counter-party (MLP pool) of your trade at the start of every hour. This fee varies based on utilisation of assets in the MLP pool and initially will be calculated as follows, dividing units of the particular asset that’s been borrowed by total units of that asset in MLP pool:

70% of the fees generated by the exchange are distributed back to MLP holders,25% will be allocated to the Mycelium Treasury, and 5% will be distributed back to the top 5% of traders by volume. The MLP pool also receives capital appreciation via market making assets in the pool with a spread.

Oracle Pricing and Trade Execution

Mycelium Perpetual Swaps’ dual use of the MLP pool as the counter-party to traders and the oracle pricing system optimises the trading experience for its users. Firstly, trades are executed with zero price impact as the traditional Automated market maker (AMM) or an order book model is not used. Trades are executed at the Oracle price plus a spread (no spread on BTC or ETH, only the long tail assets in the pool). This also benefits LPs as they are not subjected to as much impermanent loss due to the oracle pricing system (not subjecting the LPs to the cost of price discovery via arbitrage).

Furthermore, the aggregated oracle pricing system Mycelium Perpetual Swaps uses pulls price feeds directly from Chainlink, Binance, Bitfinex and FTX. By aggregating these feeds prices are normalised, eliminating the risk of exchange specific volatility.

The dual use of capital and the oracle pricing system enables MLP to be one of the most efficient pools in the entire digital asset space.

Additional LP Protection: MEV

We have contracted a proprietary trading firm to minimise any losses from the frontrunning of the oracle updates. Currently, LPs are subject to stale oracle prices which can cause an effect similar to impermanent loss in AMMs. With stale prices, fast traders have an advantage to make trades with the LP pool knowing the future price of the asset will be in their favour. To counteract this behaviour, protect and reward our LPs, the trading firm will be extracting any value from latent oracle feeds and returning profits to our LPs. This way, in the event that the liquidity pool has a stale price, 80% of the profits from Oracle Extractable Value will be distributed back to the liquidity providers.

Additionally, the proprietary trading firm will be conducting price (backrunning) arbitrage between the Mycelium AMM and other spot AMMs. Despite none of this value being extracted from liquidity providers, 80% of the profits will be distributed back to the liquidity pool!

Trade with liquidity, leverage, low fees,

Trade with Mycelium.

Need more information? Read our docs here.Need more information? Read our docs here.

Mycelium Docs
The home of Mycelium’s documentation

FAQs


All of Mycelium’s products are hosted on Ethereum Layer 2, Arbitrum. Users will need to bridge their assets to Arbitrum in order to trade Perpetual Swaps, Perpetual Pools, or Lend via MYC Lending.

Arbitrum is a secure, low-cost scaling solution that ensures our users can access low-cost derivatives in a safe, simple, and speedy environment.

If you need assistance bridging your assets, our team has prepared a guide here.


Mycelium Perpetual Swaps is a decentralised derivative platform, which allows users to open leveraged long and/or short positions on crypto-assets.

Perpetual Swaps are similar to a Future where traders can take a position based on the future price of an asset, the key difference being Perpetual Swaps mechanisms allows traders to take this position at an unspecified point in the future, making it ‘perpetual’ or unable to expire. Mycelium Perpetual Swaps allows traders to take a position on digital assets such as Bitcoin and Ethereum.


Mycelium Perpetual Swaps doesn’t use an order book model for leveraged trading. Rather, all traders trade against the Mycelium Liquidity Pool (MLP). The MLP is a basket of blue-chip assets and stablecoins pooled together (ETH, BTC, LINK, UNI, BAL, CRV, FXS, FRAX, USDT, DAI, USDC) which acts as a global AMM for leveraged trading. Liquidity providers can deposit any whitelisted asset into the MLP pool in return for MLP tokens, which represent the LPs share in the diversified liquidity pool. By acting as a universal counterparty (AMM) to traders, meaning that it agrees to be the counterparty to any long or short trade at the given price, for an asset it holds, until it runs out of said asset.


In exchange for providing liquidity to the Mycelium Liquidity Pool (MLP), liquidity providers earn rewards. Primarily, MLP holders earn 70% of fees generated on the platform, which is distributed fortnightly in ETH and or esMYC.

  • ETH Rewards: The MLP pool earns 70% of fees generated from swaps and leveraged trading. These fees are converted to ETH, before being continuously distributed to MLP stakers.
  • Escrowed MYC Rewards: These are rewards in the form of a token which has the right to vest into $MYC when staked in the esMYC vesting vault.

The trading fees that make up this revenue are entry/exit fees, borrowing fees, and or a spot trading fees. For a full overview of the trading fees, visit this page.

Additionally, LPs earn rewards from a small bid/ask spread that is charged on long-tail assets (there is no spread on BTC or ETH). These rewards accrue as MLP, shown on our front-end as Market Making APR. These rewards can be redeemed at any time, in any asset form within the MLP basket of assets.


Yes. Perpetual Pools are a marketplace for leveraged tokens, while perpetual swaps simulate spot trading with margin. They are both derivatives, but Perpetual Pool tokens act most like a leveraged ETF, where positions are transferable.


Mycelium Staking is a program established by Mycelium to give utility to our governance token. MYC holders can stake their $MYC to earn ETH rewards. MYC Stakers effectively enter a loan agreement with the Mycelium Treasury to lend their MYC. The Loan Cycles occur fortnightly, meaning deposits and withdrawals are processed at the beginning/end of each cycle. Stakers can request withdrawals throughout the cycle, noting the withdrawal will be processed and distributed at the end of the cycle.


Don’t worry, you are earning rewards! The rewards only show at the end of the 14 day loan cycle.


The way the Perpetual Pool market calculates how much money to move from the losers to the winners prevents the loser from ever losing 100% of their money. The pool does this by, in extreme scenarios, sacrificing some of the gains of the winners in order to protect the losers from losing everything. This is why we say Perpetual Pool positions cannot be liquidated.

However; this does not mean you cannot lose money by trading with Perpetual Pools.


In August 2022, TracerDAO voted to transition and rebrand to core service provider Mycelium, and $MYC as the native token. All TCR holders are entitled to change their token 1:1 to MYC via this site: https://migrate.mycelium.xyz/

The majority of TCR holders have migrated to MYC, but the site will remain active for approx. 3 years to ensure all TCR holders have the opportunity to migrate.


When a trader enters a short position, the liquidity pool will fully collateralise the position with stablecoins. For short positions, the liquidity pool is essentially a market maker that takes the opposite side of the position, increasing the long exposure of the pool. If the price of the base asset depreciates, the trader receives stablecoins from the liquidity pool. If the price of the base asset appreciates, the liquidity pool receives a portion of the user’s margin as compensation.

At close, the trader will only have to return the USD value of the initial notional value to the liquidity pool. Thus, the trader is effectively entitled to the inverse of the future “PnL” (Profit and Loss) of an asset.


With Perpetual Pools v2, users can deposit any sort of collateral for maximal optionality. Additionally, there is no minimum-commit size.


On Mycelium Perpetual Swaps traders can access up to 30x Leverage. On Mycelium Perpetual Pools traders can access up to 10x Leverage.

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