Staking Tokens (LP)

LP Tokens are given to Liquidity Providers when they add liquidity to SelenizedAssets-USTC or SELE-USTC Terraport pools. Each pool has a unique LP token associated with it and cannot be combined with LP tokens from other pools. They serve primarily as a unit of account, representing the liquidity provider's share in the pool in order to reclaim assets when they remove liquidity.

Although LP tokens exist independently as a yield-generation feature of Terraport, they are central to Selenium's market infrastructure. As such, the protocol provides SELE rewards to users who stake LP tokens as an incentive to help maintain liquid markets on Terraport for Selenized Assets and SELE.

There exists a different LP token for each SelenizedAsset-USTC's Terraport pool, as well as the SELE-USTC pool. The descriptions below refer to each individual pool's supply of LP tokens.

Minting

A user can provide liquidity by depositing tokens to both sides of a Selenium-related Terraport pool. This results in the creation of LP tokens for that pool, which they can use to retrieve assets from the pool.

Burning

It is very probable that the amounts of assets recovered by burning LP tokens will be different from the quantities deposited. This comes from a variety of reasons such as price movement of Selenized Assets / SELE, changes in your relative share of the liquidity pool, etc.

A user can burn their LP tokens to recover their deposited liquidity. The pool will send back amounts of USTC and Selenized Assets (or SELE), depending on the amount of LP tokens they burn.

LP Commission Rewards

Holders of LP tokens receive a portion of rewards generated by the pool's trading fees, divvied out in proportion to total share of LP token pool. A portion of either Selenized Assets/SELE or USTC (depending on the direction of the trade) gets added back into the pool as the LP Commission.

This functionality is not implemented in the Selenium Protocol contracts, and comes purely due to Terraport incentive structure for liquidity providers. Because the trading fee rewards are returned to the pool, they can only be withdrawn by burning LP tokens and withdrawing liquidity.

Staking Rewards

This section discusses staking rewards for LP tokens, which come from the new SELE tokens minted per block by the protocol as inflation.

Selenium allows users to additionally profit from LP tokens by staking them to receive Selenium Token (SELE) rewards. The LP tokens can be unstaked at any time, and then burned to retrieve the corresponding deposited liquidity and LP Commission rewards.

Selenium Protocol distributes rewards to each Selenized Asset staking pools in Staking contract based on the weight parameter of each Selenized Asset. Selenized Assets pools as well as the Selenium pool. All Selenized Assets - USTC staking pools receive a weight of 100, while the Selenium Token pool receives a weight of 300. Therefore, there is a stronger reward incentive to stake to Selenium pool as it confer 3 times the reward when staked relative to Selenized Assets.

A user will receive the portion of rewards for their pool equivalent to their proportional share of staked LP for that pool.