Introducing BLP V2

After months of testing options trading with POL as the standalone counterparty, we’re excited to announce the launch of the liquidity pool, the BLP token, with new risk management parameters. Users can mint and stake BLP tokens by providing liquidity to the new USDC vault.

In this post, we will share details on the liquidity pool and token, key pool parameters, the role of POL, the new BLP logo, and additional security measures.

TL;DR:

• Buffer liquidity pool v2 and BLP token are live with new parameters
• The BLP token has a new logo
• USDC vault live on Mainnet Beta for minting BLP tokens
• Trading will NOT be halted while transitioning from POL to BLP
• BLP will play a crucial role in powering bigger options trades while also facilitating the growth of POL for long-term sustainability
• 100,000 USDC worth of POL will be added to the BLP. POL will act as the last-standing risk management measure
• Buffer audit by sherlock is complete, and a coverage of up to $2 Million has been purchased on Sherlock to protect users from smart contract exploits.

The New Buffer Liquidity Pool

Similar to the old implementation, the new BLP token is USDC-based, acting as a counterparty to all options trades placed on Buffer. The pool has a probabilistic edge that can generate positive yield consistently over the long term. The pool loses whenever a trader makes a positive PnL, and the pool makes a profit whenever the trader makes a negative PnL.

Along with statistical advantage, we have added new parameters at the protocol level to manage the stability of the liquidity pool and risk for LPs.

1. Max utilization — Max vault utilization at a time, is capped at 40% of the total available liquidity. (Would be increased gradually)
2. Max utilization per asset — 2–3% of the total available liquidity
3. Separate Payout (%) for Up and Down (will be kept the same for all assets initially but can be changed in case of unidirectional moves in the market)
4. Max utilization per trade — 0.25% of the available liquidity;
5. Max limit — the maximum amount of liquidity that can be provided to the USDC vault at any given time is capped at 500,000 USDC.

Update: Max limit will be increased to 1.5M after trading begins against the BLP pool

What’s the difference between the old and the new liquidity pool? — The new changes have been made to provide optimized risk management for Buffer LPs:

• An asset level utilization limit (4% of the available liquidity) has been added
• Per trade size has been reduced to 0.4% of the available liquidity.
• Max vault utilization has been reduced to 20% of the available liquidity

The BLP token

BLP token is a unique liquidity provider token on the Buffer platform. BLP can be minted by providing liquidity to the USDC vault on the Earn Page. Upon minting, BLP is staked automatically, accruing trading fees and esBFR rewards for its holders.

Hence, staked BLP holders earn:

• USDC: 60% of the trading (platform) fee
• esBFR tokens: at a predetermined emission rate

What’s the difference between the old and the new BLP token? — The minimum holding period before the redeeming function is activated has been increased to 24 hours. Hence, LPs will have to hold their staked BLP tokens for at least 24 hours after minting before you can redeem BLP tokens

One of the most burning questions that Buffer users might have with the re-introduction of BLP is —

What role does POL (protocol-owned liquidity) play on Buffer?

A starting POL worth 100,000 USDC will be added to the liquidity pool. POL will act as the last standing in all cases on Buffer, providing a strong risk mitigation tool for liquidity providers. For example — in the case of informed flow trades against BLP, LPs can remove their funds before POL is released, giving them added protection in case of a long-tail event. This is made possible with a 30-hour timelock, meaning if the admin triggers a withdrawal, LPs will have 30 hours to remove their funds before POL is removed and all the trade payout would be done from POL and other LPs can exit at the current exchange rate without incurring any loss or volatility from trades which are still open.

New BLP Logo — who dis?

While our old BLP logo was much loved and shared synergy with the overall Buffer branding, we felt the new BLP needed a refresh. The new symbol is a more dimensional/modular design similar to the BLP mechanics, and it represents a new, more optimistic beginning of another chapter for the protocol and community.

Keeping you comfy

As announced before, besides vigorous internal testing and community testing, Buffer has also been successfully audited by Sherlock — an industry-leading auditing and smart contract coverage protocol that has pioneered the next generation of smart contract audits.

Additionally, all users of the Buffer protocol are protected from smart contract exploits with sherlock coverage. We have purchased coverage of up to $2 Million on TVL for all our users.