There are three main types of users on the platform. All have their own unique usage of the protocol and are crucial to the overall health of the ecosystem.
On APWine, you can get your yield upfront by selling it on the dedicated AMM, while having your principal tokens locked for the entire duration of a Future.
Farmers can therefore hedge their risk selling their future yield at a fixed rate, while also benefiting from the upfront liquidity to reinvest in other strategies.
Alice is farming SushiSwap rewards through SUSHI staking (xSUSHI) with an estimated APY of 15%. The spot price for the current period estimation is implying an APY of 10% and she would be more comfortable selling her future yield now at that rate than having to wait. To do that, she has to do the following actions:
- Navigate on the interface to the corresponding xSUSHI Future
- Approve and deposit her xSUSHI on APWine, which will generate two types of tokens, representing the principal deposited and the future yield.
- Enter the amount of FYT she wants to sell on the AMM (her whole balance if she wants to sell all her future yield)
- Execute the swap
Note that in this process, she can sell partially the yield at different times and prices. At any moment, if Alice decided not to sell her FYTs, she can withdraw the principal and the yield generated until now. The withdrawal function will burn her PTs and FYTs, and she will get back her initial xSUSHI as if she had not deposited on APWine.
Traders can speculate on the variation of APY through the pricing of FYTs, which represent the yield that would be generated by an asset over a defined period of time.
Bob thinks that there will be an increase of activity in AAVE DAI borrowing in the next week, hence the deposit APY would go up. The spot APY is 5% and APWine AMM spot price implies an estimated APY of 6% during that period. To take advantage of that volatility, Bob has to do the following actions:
- Navigate on the AMM interface to the corresponding FYT/Underlying pair for the aDAI Future.
- Swap DAI for FYT
- Wait for the period expiration
- Redeem the underlying yield generated during that period, burning his FYTs.
Buying FYTs allowed Bob to be exposed directly to the interest rates offering a leveraged long position on them - without having the capital needed to generate these interests. Allowing the trade of future yield creates an entirely new market while allowing arbitrageurs to take advantage of inconsistencies in interest rates, making it more fair and healthy.
As with most DeFi protocols, APWine needs liquidity to ensure a smooth experience throughout the whole trading and swapping process. Liquidity Providers are defined as the actors providing liquidity to the APWine AMM. They can earn revenue through swapping fees and liquidity mining rewards.
The fixed rate feature can be used to create arbitrage on the market in certain circumstances. The protocol will calculate if it’s more lucrative to tokenize an IBT to get PT and FYT or to directly buy PT with a discount on the AMM if the pool is unbalanced, resulting in a profit for the arbitrage maker who just have to wait to redeem the PT at the end of the period.