Level Finance

Investment Thesis

While Level initially gained prominence by becoming the first GMX fork on BNB Smart Chain, it has since grown to differentiate itself from other perpetual decentralized exchanges, or ‘perp DEXes,’ via multiple proprietary improvements from TradFi and DeFi. For a recap on, perp DEXes, check out our piece here.

The first improvement implemented by Level Finance is tranched risk management for liquidity providers. Drawing inspiration from Mortgaged-Backed Securities in TradFi, the protocol achieves this by introducing tranches of LP positions into programmatically-defined risk exposures.

Each tranche represents a specific pool of assets from those available on the platform, currently BTC, ETH, BNB, and stablecoins. All tranches earn fees from traders on the platform according to the breakdowns above. Concurrently, each tranche is exposed proportionately to the gains and losses of traders.

Moreover, Level Finance implements a dynamic emissions structure whereby emissions are based on the total trading fees paid on the platform. $20k in LVL incentives are distributed for the first $100k in trading fees and every $50k thereafter. Importantly, this creates a mechanism whereby incentives di...