💫LP Risk Grading

zkDX has implemented a risk grading system for traders and liquidity providers, empowering them to make informed decisions and manage their risks according to their risk preferences.

The risk grading system in zkDX is based on factors such as security, liquidity, and market stability associated with trading products. The system categorizes liquidity provision behaviors into three risk levels: Low, Medium, and High. These levels are represented by $ZKLP (Low Risk), ZKMLP (Medium Risk), and ZKHLP (High Risk) respectively. By disclosing the risk levels, zkDX enables liquidity providers to gain a better understanding of the risks associated with the products they engage in.

Using this risk grading, zkDX creates liquidity pools with different risk levels. Traders and liquidity providers have the flexibility to choose the specific trading product and pool that aligns with their risk preferences. This allows them to trade or provide liquidity for trading products with varying risk grades and enables them to earn returns that correspond to their risk exposure. These returns primarily come from different fee ratios and revenue allocations.

The risk grading system helps in isolating risks while also expanding the coverage of trading products to include more volatile assets. By marketizing the risk, the market is empowered to make choices, improving capital efficiency and enabling a more effective allocation of resources.