Leverage Tokens

What are Leverage Tokens?

Leverage tokens are ERC-20 tokens that provide leveraged exposure to an underlying asset without the need to manage a margin position, collateral, or liquidation risk. Each token represents a rebalancing leveraged position backed by perpetual futures on Nado, the perpetual DEX on Ink.

When you mint a leverage token, the protocol deposits your collateral and opens a corresponding perpetual position on Nado. The token tracks the leveraged P&L of that position. You hold the token — the protocol manages everything else.

How It Works — The Nado Integration

Blot leverage tokens are backed by real perpetual futures positions on Nado. This is not a synthetic or rebasing mechanism — there is an actual perp position behind every token.

• Mint — User deposits USDT0. The protocol opens a leveraged perp position on Nado at the target multiplier.
• Hold — The token's NAV tracks the P&L of the underlying Nado position. Funding rates, fees, and rebalancing costs are reflected in NAV.
• Redeem — User burns the token. The protocol closes (or reduces) the Nado position and returns the underlying value in USDT0.

Rebalancing

Leverage tokens rebalance to maintain their target leverage ratio. The operator bot monitors all positions and triggers rebalancing when the effective leverage drifts beyond a configured threshold.

• Target leverage — the intended multiplier (e.g., 2x, 3x)
• Rebalance threshold — the deviation band that triggers a rebalance
• Daily rebalance — positions are checked and adjusted at least once per day, more frequently in volatile markets

What Happens During Rebalancing

When ETH rises and an ETH-2X token's effective leverage drops below target, the protocol increases the Nado position size to restore 2x exposure. When ETH falls and effective leverage exceeds the target, the protocol reduces the position. This is the core mechanism that maintains consistent leverage.

Extreme Volatility & Circuit Breakers

The protocol includes safety mechanisms for extreme market conditions:

• Emergency deleveraging — if a position approaches Nado's liquidation threshold, the protocol automatically reduces leverage to protect remaining NAV
• Circuit breakers — oracle price deviations beyond configured bounds pause minting and redemption until prices stabilize
• Mint/redeem cooldowns — during extreme volatility, a short cooldown may be enforced between operations to prevent front-running of rebalance events
• Emergency pause — the protocol can be paused entirely if critical issues are detected

In the worst case, a leverage token's NAV can approach zero but the holder never owes anything beyond their initial investment. There are no margin calls.

Net Asset Value (NAV)

Each leverage token has a NAV that reflects its current value based on the underlying Nado position. When minting or redeeming, tokens are priced at their current NAV plus applicable fees.

Simplified NAV Formula

NAV = baseNAV × (1 + leverage × priceChange)

Where priceChange is the percentage change in the underlying asset price since the last rebalance event.

Supported Assets

Blot launches with five leverage tokens covering ETH and BTC exposure. New tokens are added based on available perpetual markets on Nado — each asset requires sufficient perp liquidity and a reliable oracle price feed.

All leverage tokens are ERC-20s minted as LayerZero OFTs (omnichain fungible tokens), bridgeable to other chains from day one.