Becoming a Liquidity Provider

Users can become liquidity providers by depositing Bitcoin (WBTC on Solana) into the Crypta Liquidity Pool. In exchange, they receive Crypta Liquidity Pool tokens (CLP), which represent their ownership share of the pool.

This is not a risk free investment as the bankroll will fluctuate, however, over the long-run the bankroll will benefit from the house edge and the value of the pool will grow. This allows liquidity providers to take advantage of the house edge and earn a yield on their Bitcoin exposure, which would otherwise be unproductive capital.

Users can provide capital to the Bankroll to receive the following CLP tokens:

$$FX_{rate} \, = \, \frac {Net\:Asset \: Value}{CLP \: Supply}$$

$$CLP \: Tokens \: Received \, = \, \frac {BTC \: Deposit}{FX_{rate} \: * \: (1+Dilution \, Fee)}$$

Users can withdraw capital from the Bankroll at any time by burning their CLP tokens:

$$BTC \: Received \: = \: CLP \: Tokens * FX_{rate}$$

Dilution Fee

To protect existing liquidity providers from dilution, new deposits are subject to a 1% dilution fee.

The dilution fee prevents:

• Users from exploiting the earnings structure by trading in and out

• Rewards long term participants for sustaining liquidity

• Creates fair value preservation for early entrants.