Leverage Tokens

How Blot's tokenized leverage positions work under the hood.

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 in the traditional sense. Each token represents a rebalancing leveraged position.

Bull Tokens

Long leveraged exposure. An ETH-2X-BULL token targets 2x daily returns on ETH price movements.

Bear Tokens

Short leveraged exposure. An ETH-2X-BEAR token targets 2x inverse daily returns on ETH price movements.

Rebalancing Mechanism

Blot leverage tokens rebalance to maintain their target leverage ratio. Rebalancing occurs when the effective leverage deviates beyond a defined threshold from the target multiplier.

Target leverage — the intended multiplier (e.g., 2x, 3x)
Rebalance threshold — the deviation band that triggers a rebalance
Rebalance frequency — how often the protocol checks for rebalancing needs

⚠Volatility Decay

Leveraged tokens are subject to volatility decay over longer holding periods. They are designed for short-to-medium term directional exposure, not as a long-term buy-and-hold investment.

Net Asset Value (NAV)

Each leverage token has a NAV that reflects its current value based on the underlying asset price and the leverage position. The NAV is calculated using oracle price feeds and the current state of the leveraged position.

When minting or redeeming, tokens are priced at their current NAV plus any applicable fees.

NAV Calculation

The NAV tracks the performance of the leveraged position since the last rebalance:

NAV = baseNAV * (1 + leverage * priceChange)

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

Supported Assets

Blot currently supports leverage tokens for major crypto assets. New assets are added through governance proposals. Each asset requires a reliable oracle price feed and sufficient liquidity.

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