The Potentia Protocol

Empowering Traders Through Permissionless Power Derivatives

Potentia Protocol is a suite of smart-contracts that creates a fully permissionless power derivatives market. It's a novel approach to enable the creation and trading of high order perps without the risk of liquidation.

Protocol Roles

1. Pool Operators: Pool Operators(POs) create and operate the Potentia Pools. These pools can be configured to track any underlying asset, such as WETH, WBTC, or LINK etc, with a user-defined power factor $k$ where $k\in 2,3,4,..$ When initializing a pool, the PO sets the power factor and selects the underlying asset, then provides the initial liquidity. For example, creating a pool with a power factor $k=3$ and WBTC as the underlying asset would enable the trading of ${\text{WBTC}}^3$ derivatives.

2. Pool Managers: POs can delegate the task of changing certain pool parameters to pool managers. The PO must allocate the Pool Manager role to someone before they can tweak the pool parameters. POs have the global role of the pool whereas Pool Manager can only change the pool parameters.

3. Liquidity Providers: Liquidity Providers(LPs) add or remove the underlying asset liquidity to/from the pool. Unlike other AMM pools, Potentia LPs don't provide liquidity for 2 separate assets. LPs only provide liquidity for the underlying asset of the pool. In exchange for adding liquidity, LPs receive the calculated LP tokens.

4. Traders: Traders can open/close long or short positions on the pool. If it's a power pool with $k=2$ and underlying asset as LINK, the traders would be taking long or short positions on ${\text{LINK}}^2$ derivative. An open position in a Potentia Pool is represented by the number of ERC20 tokens that the traders receive for opening a long/short position.

Look into the Protocol Concepts to get a deeper understanding of how Potentia works.