How To
Complete Guide to the Selenium Protocol
Welcome to the world of synthetic finance! This unified guide will provide you with all the necessary information to use the Selenium protocol, from the basics to the most advanced strategies, including earning opportunities and risks.
1. The Basics of the Protocol
Selenium is a decentralized platform that allows you to create and trade synthetic assets (sAssets), replicating the value of real-world assets. To operate, you can take on different roles:
Minter: Borrows and creates new sAssets.
Trader: Buys and sells sAssets for a profit.
Liquidity Provider: Makes their assets available to facilitate trades.
Staker/Farmer: Secures the protocol to earn rewards.
2. Step-by-Step Guide to Using the Platform
Step 1: Preparation and Connection
Get the assets: You'll need crypto assets (e.g., USDC, LUNC, USTC) to get started. Store them in a wallet compatible with the Terra Classic network.
Connect to the dApp: Access the Selenium web platform and click "Connect" in the top right corner to link your wallet.
Step 2: Choose Your Earning Strategy
Your journey in the protocol depends on how you want to earn. The four main paths are:
Minting: If you want to create an sAsset.
Trading: If you want to earn from price fluctuations.
Liquidity Providing: If you want to earn fees and rewards by providing liquidity.
Staking or Farming: If you want to earn rewards by securing the protocol.
3. Your Activities and Earning Methods
If You Want to Mint:
Minting an asset on the Selenium Protocol isn't just buying it; it's becoming the very source of the asset. By depositing collateral, you can create it at the price determined by the oracle, which is often more advantageous than the market price. You can then use it however you prefer: resell it for arbitrage, hold it for direct exposure, or even sell it immediately to bet on a price drop of the underlying asset.
This operation opens the door to strategies that wouldn't be possible with just buying from a pool, such as shorting (mint → sell → repurchase at a lower price) and participating in liquidation auctions. In essence, minting gives you more control and more earning options: you go from a simple buyer to an active player in the system, capable of exploiting all the opportunities the protocol offers.
How to do it: Access the "Mint" section, choose the sAsset, deposit the collateral, and set your collateralization ratio (it's recommended to set it higher than the minimum, e.g., 170%, to avoid the risk of liquidation).
If You Want to Trade:
This is the simplest path for a user who wants to trade sAssets.
How to do it:
Long: buy the sAsset (e.g., sGOLD) on Terraport and hold it in your wallet as if it were the underlying asset; you can sell it whenever you want.
Short and Arbitrage: when the price in the pool is above the oracle's price (at a premium), you can short indirectly by minting the sAsset and selling it in the pool. You then buy it back when the price drops to close your CDP. If you don't want to mint, you can also speculate just on the premium returning to normal by buying/selling sAssets where there is a divergence between the pool and the oracle.
Practical tips: Monitor the premium/discount between the pool price and the oracle price. A large portion of the profit opportunities in spot trading on Selenium comes from these divergences, not just from the direction of the underlying asset.
If You Want to Farm on Synthetic Pairs:
Farming on the Selenium Protocol involves providing liquidity to a trading pool composed of an sAsset and USDC. In return, you receive LP tokens that you can stake to get rewards in SELE, LUNC, USTC, and USDC, plus trading fees from Terraport.
How to do it: In the "Farm" section, select a trading pair (e.g., sAsset-USDC). Enter the amount you want to provide into the Autostake form. The system will automatically perform all the necessary operations, and you'll immediately start earning interest.
If You Want to Farm on the SELE Pair:
This type of farming allows you to earn by contributing to the liquidity of the governance token.
How to do it: In the "Farm" section, provide liquidity to the SELE/LUNC trading pair. In exchange, you receive LP tokens that you can stake in the farm on Terraport or Selenium.
Earnings: By staking your LP tokens, you get two types of rewards:
A portion of the pool's trading fees.
Additional rewards in LUNC tokens.
If You Want to Stake SELE Tokens:
This activity allows you to earn by directly locking the governance token.
How to do it: In the "Earn" section, lock your SELE tokens.
Earnings: By staking SELE tokens, you get rewards in USTC tokens.
4. Advanced Strategies and Extra Earnings
Liquid Staking: Liquid stake LUNC on Terraport to get bLUNC. Use it as collateral to mint an sAsset and then farm it. This way, you earn from both native LUNC staking and from farm rewards (SELE tokens and the pair's APR).
Liquidation Auctions: You can buy the collateral of a liquidated position with a 10% discount from the Auction section. To do this, you must return the equivalent sAsset.
Example: User A mints $1000 of sGOLD, providing $1500 in USDC as collateral. The value of sGOLD rises, bringing the collateralization to 149%. The position enters the liquidation phase. Anyone who returns $900 of sGOLD will receive $1000 in USDC in exchange, making an immediate 10% profit.
Arbitrage: Exploit the price differences between the oracle and the pool on Terraport.
If the pool price is lower: Buy the sAsset at a lower price and sell it to close a CDP position you have, keeping the difference as profit.
Example: If the oracle says the price of sGOLD is $150, but on the Terraport pool it's $145, you can buy sGOLD at $145 and close a CDP position you opened at $150, earning $5 for each sGOLD.
If the pool price is higher: Mint an sAsset and sell it at a price higher than the oracle's.
Example: If the oracle says the price of sGOLD is $150, but on the Terraport pool it's $155, you can mint sGOLD at $150 and sell it immediately for $155, making a profit of $5 for each sGOLD.
5. Risks to Know
Liquidation Risk: If the value of your collateral drops below 150%, your position can be liquidated. After one hour, it will automatically be placed in the Auction section to be purchased by other users with a 10% discount. To minimize this risk, it is recommended to mint assets with a collateralization ratio higher than the minimum.
Last updated