Jan 27, 2021 · 5 min read · cat
Dear Linear Community, Partners and new users:
As we move closer to the launch of the Linear Exchange, we would like to share with you a selection of frequently asked questions. These FAQs will help to educate those that are not familiar with the inner workings of the Linear platform.
For those that have had the opportunity to use our Mainnet Buildr built on Binance Smart Chain, you will now have experienced the speed and cost-efficiency when transacting on our protocol. For those that are new to staking LINA tokens, we want to welcome you to our Linear community, you join us at the beginning of our exciting journey into the DeFi world.
Please see below the initial top 5 questions.
How do I earn staking rewards?
Many users have asked about how to earn staking rewards on Linear. At Linear we give rewards to users who stake their LINA tokens and build debt. Built debt can come in the form of ℓUSD or any of our synthetic Liquids that are purchased on our Linear.Exchange. Providing a user has a “Debt Balance” greater than zero, they will accrue LINA staking rewards and a share of Linear.Exchange fees in ℓUSD. User rewards are continuously calculated per block and are based on the percentage of debt the users have relative to the entire debt pool The more debt you have the more rewards you earn. We base our rewards on the amount of debt users build as a way to compensate them for being a counterparty to traders on our Linear.Exchange.
So I have built ℓUSD, what can I do with it?
At Linear, our protocol is suited for both synthetic asset traders and/or yield farmers and this starts with the building of ℓUSD through Buildr or purchasing ℓUSD on a DEX. Traders can use ℓUSD to purchase synthetic assets on our Linear. Exchange. Yield farmers can use ℓUSD via our DeFi protocols to generate additional yield or even leverage their staking positions on Linear. We will be expanding our footprint in the DeFi ecosystems so be on the lookout as we announce additional ℓUSD and LINA pools on other protocols on both the ETH and BSC chains coupled with LINA reward incentivization programs.
How do I get BNB BEP-20 so I can conduct transactions on Linear?
Purchase BNB on Binance and withdraw to your Metamask wallet in the BEP-20 format
We recognize that even with the above, there are some limitations in obtaining BNB BEP-20 for some users and the team are working on a solution which will be rolled out shortly. In the meantime, if you have any issues obtaining BNB BEP-20, please contact our admins via Telegram or Discord.
What exactly is P-Ratio?
The P-Ratio or “Pledge-Ratio” is the collateralization ratio that determines how much ℓUSD debt a user can build. The formula of the pledge ratio is (The value of staked + Locked LINA) / (Value of a user’s debt balance). Our pledge ratio is currently set at 500% and each user’s debt position is overcollateralized as all stakers serve as a counterparty to the trades on the Linear.Exchange. The P-Ratio is important as users with P-Ratio below 500% are unable to claim their weekly rewards or build ℓUSD even if they have debt that is earning rewards. Users who find themselves in this situation can fix their P-ratio by burning ℓUSD to repay their debt or stake additional LINA.
How does my debt fluctuate and even if I build ℓUSD at a 500% P-Ratio, can my debt balance change?
As mentioned prior, all stakers using Linear that build ℓUSD become a part of our Linear Debt Pool which serves as the counterparty to traders on the Linear Exchange. Upon building ℓUSD, the ℓUSD becomes debt and the user is responsible for covering his/her pro-rata share of the Linear Debt Pool from this point forward. But, how does the debt move? Let’s take a look at some different scenarios.
One of Linear’s users (Oscar) has used Buildr to stake his $1000 worth of LINA to build $200 worth of ℓUSD with a P-Ratio of 500%. Upon building his 200 ℓUSD, this amount is allocated into the Linear Debt pool and his Debt is 200 ℓUSD. At the time of building his ℓUSD, three other users, Jenny, Bob, and Vanessa are in the Linear Debt Pool with $400 USD worth of Liquid BTC (ℓBTC), $400 USD worth of Liquid ETH (ℓETH) and 5000 ℓUSD respectively. The total in Linear’s Debt Pool is $6000 USD [Oscar’s $200 ℓUSD + Jenny’s $400 ℓBTC + Bob’s $400 ℓETH + 5000 ℓUSD]. So, Oscar’s share of the Linear Debt pool is Oscar’s 200 ℓUSD / (Oscar’s $200 ℓUSD + $400 ℓBTC + $400 ℓETH + 5000ℓUSD) = 3.33%. Thus, Oscar is responsible for 3.33% of the total debt in the system.
Let’s assume that the following day, BTC increases by 25%. Linear’s Debt Pool will increase to $6100 USD [Oscar’s $200 ℓUSD + Jenny’s ($400 x 125% = $500 ℓBTC) + Bob’s $400 ℓETH + Vanessa’s $5000 ℓUSD]. As Oscar is responsible for 3.33% of the total debt, his debt now owed will be $203.3 USD even though he only built $200 ℓUSD and his P-Ratio would now be 492% [$1000 LINA / $203.3 Debt].
Let’s assume that the next day, BTC decreases by 50%. Linear’s Debt Pool will decrease to $5800 USD [Oscar’s $200 ℓUSD + Jenny’s ($400 x 50% = $200 ℓBTC) + Bob’s $400 ℓETH + Vanessa’s 5000 ℓUSD]. As Oscar is responsible for 3.33% of the total debt, his debt now owed will be $193.3 USD and his P-Ratio would now be 517% [$1000 LINA / $193.3 Debt]. At this point, Oscar can either repay all his debt ($193.3) and have 6.70 ℓUSD in profit to spend or simply build an additional 6.70 ℓUSD to get his P-Ratio back to 500%.
Note that the above scenarios assume Oscar’s % of the debt pool remains static. In reality, a user’s % of the debt pool changes as other user’s repay or incur debt by building or burning ℓUSD.
Stay in touch!
Follow us on Twitter: https://twitter.com/LinearFinance
Join the conversation on Telegram: https://t.me/linearfinanceofficial
Join the conversation on Discord: https://discord.gg/wB8B2NeAm8