Token Weights

The fees to mint VLP, burn VLP or to perform swaps will vary based on whether the action improves the balance of assets or reduces it. For example, if the index has a large percentage of VIC and a small percentage of CUSD, actions which further increase the amount of VIC the index has will have a high fee while actions which reduces the amount of VIC the index has will have a low fee.

The token weights can be seen on the Dashboard.

Token weights are adjusted to help hedge VLP holders based on the open positions of traders. For example, if a lot of traders are long VIC, then VIC would have a higher token weight, if a lot of traders are short, then a higher token weight will be given to stablecoins.

If token prices are increasing, then the price of VLP will increase as well, even if there is a larger number of open long positions on the platform. The portion reserved for long positions can be treated as stable in terms of its USD value since if prices increase the profits from that portion will be used to pay traders, and if prices decrease, the losses of traders will keep the USD value of the reserve portion the same.

If a lot of traders are short and larger weights are given to stablecoins, then VLP holders would have a synthetic exposure to the tokens being shorted, e.g. if VIC is being shorted then the price of VLP will decrease if the price of VIC decreases, if the price of VIC increases then the price of VLP will increase from the losses of the short positions.