LEAP-38: GMX hedging and deploy on Arbitrum

Simple Summary

Integrate Lyra with GMX and deploy a version of the contracts on Arbitrum. Initially deploying a USDC/wETH market.

Abstract

Deploy the Lyra protocol to Arbitrum, using GMX perpetuals as the source of liquidity with which to collateralize and delta hedge the AMM. This would require supporting USDC as a quoteAsset, whilst using wETH, wBTC, and native tokens (e.g. UNI) as collateral against short call positions.

Motivation

This deployment would primarily be in response to user and integrator requests for an Arbitrum deployment. By running two instances of the protocol on multiple L2s, the resiliency of the protocol to an individual shock to one of them increases. Arbitrum has been successful at attracting a large DeFi user base and developer community. By expanding to Arbitrum, Lyra can reach these potential integrators, driving more volume through the protocol.

Further, the use of USDC as quote collateral (and wrapped ETH/BTC + native collateral for DeFi tokens), will increase the pool liquidity available to Lyra for use within the protocol. This should improve the user experience, and increase the volumes that the protocol can feasibly support.

Specification

The Lyra protocol contracts will need to be modified to handle quoteAsset and baseAsset ERC20 tokens that do not have 18 decimals (e.g. USDC with 6dp and wBTC with 8dp). These changes are included under the specifications of LEAP-36.

The SynthetixAdapter will be replaced by a GMXAdapter contract. This will facilitate retrieval of spot price from the GMX contracts, as well as comparing those values to Chainlink. The GMXAdapter will also be responsible for handling swapping covered call collateral (baseAsset) collected at settlement and during liquidations into quoteAsset.

Delta Hedging

TheShortPoolHedger will be replaced by a GMXFuturesPoolHedger contract. This will be responsible for opening and managing perpetual future positions against the GMX pool to delta hedge the liquidity pool.

Within the GMXFuturesPoolHedger a target leverage can be specified, allowing for greater capital efficiency of the Liquidity Pool funds being used to hedge.

Liquidity Pool Changes

There will be an additional canHedge check added to the LiquidityPool contract, which will block the opening of trades when the hedging module (GMXFuturesPoolHedger) deems the position to increase risk beyond an acceptable threshold (i.e. the delta exposure increases beyond the available hedging liquidity on GMX).

Configurable Values

Parameter	Description	Value
acceptableSpotSlippage	The maximum difference between the CL price and executed GMX price	1.02 (2%)
deltaThreshold	Bypass the interaction delay if the required hedge is greater than this	100
targetLeverage	Target leverage ratio	1.5
leverageBuffer	Leverage tolerance before allowing collateral updates	0.4
minCancelDelay	Seconds until a pending order can be canceled	120

Copyright

Copyright and related rights waived via CC0.