Mycelium's Perpetual Swaps is a financial instrument in which a user who holds an asset (Liquidity Providers) offers to swap the future “PnL” (Profit and Loss) of an asset to a counterparty (Traders) in exchange for lending interest. In Mycelium Perpetual Swaps, all liquidity providers' assets are pooled together into a collective liquidity pool, named the Mycelium Liquidity Pool, which then acts as a universal counterparty to traders, meaning that it agrees to be the counterparty to any long or short trade at the given price, for an asset it holds, until it runs out of said asset.

Oracle Pricing

The mechanism outsources asset pricing from an oracle price feed and executes trades at the oracle price plus or minus a small spread on long-tail assets (there is no spread charged on BTC or ETH positions). However, traders do not suffer price impact as all traders can execute large trades at exactly the same price as if they were to execute a small trade.

MLP Token

The MLP (Mycelium Liquidity Pool) is a basket of blue-chip assets and stablecoins pooled together, which acts as a global AMM for leveraged trading. Liquidity providers can deposit any whitelisted asset into the MLP pool in return for MLP tokens, which represent the LPs share in the diversified liquidity pool.
LPs that deposit into the Mycelium Liquidity Pool have price exposure to all assets within the collective liquidity pool, not only the asset they deposit. In other words, all LPs will end up with the same position regardless of the asset they deposit. The magnitude of their exposure to the base assets in the pool is the sum of the base assets (non-stablecoins) that aren't being lent out to traders, in addition to the synthetic long-exposure that they get from market making short positions.

MLP Rewards

The MLP tokens have the potential to appreciate in capital due to it's long exposure to the basket of asseys. See MLP Capital Appreciation for more details.
Seperate from this, Liquidity Providers can earn income from trading fees (Entry/exit, borrow fee, and spread on long tail assets), which accrues in the form of:
ETH Rewards: The MLP pool earns 70% of fees generated from swaps and leveraged trading. These fees are converted to ETH, before being continuously distributed to MLP stakers.
Escrowed MYC Rewards: These are rewards in the form of a token which has the right to vest into $MYC when staked in the esMYC vesting vault.

Market Making Positions

When a trader enters a long position, the MLP will "lend out" the notional value (Notional Value is defined as the USD value of the position). Notional Value is calculated by = (units of asset * oracle price of asset of the base asset (e.g. ETH) to the user). See MLP Mechanism for more details.
When a trader enters a short position, the MLP will "lend out" the notional value of the trader's position in stablecoins. In this sense, for short positions the liquidity pool is essentially a market maker that takes the opposite side of the position, increasing the long exposure of the pool. See MLP Mechanism for more details.
  • Note that there is no real "lending" that is occuring. All assets stay with the MLP pool at all times. However, the pool internally tracks within its own ledger which assets are being "lent out", marks these as utilised, and deems them as inaccessible for future traders to "borrow" these assets.