Mechanics
How the Kimp Pool acts as counterparty to every Kimp Contract, how NAV is computed, and how fees and trader P&L flow to liquidity providers.
The Kimp Pool is a single liquidity vault that takes the other side of every Kimp Contract. Traders never match against each other. They open and close against the pool, and the pool holds the net position of all traders combined. Liquidity providers deposit ETH or USDC and receive kLP, a token that represents a pro-rata claim on the pool's net asset value.
The model is the same one used by GMX's GLP: one pool, many markets, liquidity providers as the house. The difference is the underlying. The pool is exposed to the kimchi premium, not to the price of an asset.
Role of the pool#
- Counterparty to every open position on every listed asset, in both the open lane and the Verified Lane.
- Escrow for trader margin. Collateral is posted up front and held by the pool until the position is closed, settled or liquidated.
- Recipient of the LP share of protocol fees, all skew charges and the liquidation penalty net of the keeper share.
- Payer of trader profits and receiver of trader losses.
Net asset value#
NAV is accounted in USD. It is computed on-chain by KimpPool.nav() on every deposit, withdrawal and settlement.
NAV = USD value of pool assets (excluding escrowed trader margin) + accrued fees owed to the pool - net unrealized trader P&LNet unrealized trader P&L is the sum of the P&L of every open position, marked at the latest finalized index value. When traders are net in profit, that amount is a liability and reduces NAV. When traders are net in loss, NAV increases by the same amount. ETH held by the pool is valued at the finalized global ETH/USD median, the same P_global_usd the reporter set already publishes for the ETH Kimp Index. See Sources.
Where LP returns come from#
| Source | Share to the pool |
|---|---|
| Base trading fees (open, close, settlement) | 50% |
| Dynamic skew charge | 100% |
| Liquidation penalty (0.50% of notional) | 90% (10% to the keeper) |
| Net trader P&L | Opposite side: trader losses are pool gains, trader gains are pool losses |
The remaining base fees go 30% to $KIMP stakers and 20% to buyback and burn. Fee rates are listed in Fees.
Why the exposure is bounded#
The pool's risk comes from net skew. If longs and shorts are balanced on an asset, their P&L offsets and the pool earns fees with no directional exposure. Three mechanisms keep the imbalance limited.
- 1Per-asset open-interest caps, expressed as a percentage of NAV. See Skew limits and OI caps.
- 2A per-asset net skew cap equal to 50% of the asset's OI cap.
- 3A dynamic fee curve that charges trades increasing the imbalance, and nothing to trades reducing it.
Settlement uses a one-hour TWAP of the index rather than a single print. This removes the incentive to push the Upbit price in the final minutes before expiry. See Settlement TWAP.
Weekly cycle#
Every series on every asset expires on Friday at 08:00 UTC. At settlement all open interest is closed out at the TWAP, P&L is realized, and the next weekly series lists. The pool therefore returns to zero open interest once per week, unless a series is extended by an Upbit halt, in which case that series settles when the extension ends. Queued withdrawals are processed at this point, before new positions can open. See LP token.