despiegk
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283 lines
9.0 KiB
Markdown
283 lines
9.0 KiB
Markdown
---
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sidebar_position: 1
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---
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# Liquidity Pools: Simplified Overview
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Our ecosystem uses three interconnected liquidity pools to manage the flow of value between tokens and external markets. This page provides a high-level understanding before diving into the detailed mechanics.
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:::tip Start Here
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If you're new to the system, read this overview first. Then explore the detailed documentation on [Position-Based Pools](/core-concepts/position-based-lp) and [Dutch Auction Exits](/core-concepts/dutch-auction-exit).
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:::
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---
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## The Big Picture: Three Pools
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```mermaid
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graph TB
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subgraph External["External World"]
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FIAT[💵 Fiat/USDC]
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TFT_MARKET[🌐 TFT Market]
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end
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subgraph Internal["ThreeFold Ecosystem"]
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TFT_LOCKED[🔒 Locked TFT]
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CC[💎 Cloud Credits CC]
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TFTF[📊 TFT Future TFTF]
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POOL1["Pool 1: TFT → CC<br/>(One-Way Entry)"]
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POOL2["Pool 2: CC ↔ TFTF<br/>(Internal Trading)"]
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POOL3["Pool 3: TFTF ↔ USDC<br/>(Controlled Exit)"]
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end
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TFT_MARKET -->|Buy TFT| POOL1
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POOL1 -->|Lock TFT<br/>Mint CC| CC
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CC <-->|Convert| POOL2
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POOL2 <-->|Based on TFT price| TFTF
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TFTF <-->|Dutch Auction<br/>5% cap, 20% discount| POOL3
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POOL3 <-->|Controlled bridge| FIAT
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style POOL1 fill:#e1f5ff
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style POOL2 fill:#fff4e1
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style POOL3 fill:#ffe1e1
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```
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---
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## Your Journey Through the System
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### 1. Entry (Pool 1: TFT → CC)
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**What it does**: Converts your TFT into stable Cloud Credits
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**How it works**:
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- You bring TFT (purchased from market or earned from farming)
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- TFT gets **locked** (not sold, not converted - just held)
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- CC is **minted** at a fixed rate (currently 1 CC for 2 TFT)
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- You receive CC to spend on cloud services
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**Key point**: This is a **one-way** swap. You can't directly convert CC back to TFT through this pool.
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**Example**:
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```
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You have: 1,000 TFT
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You deposit → 1,000 TFT gets locked
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You receive → 500 CC (at 2:1 rate)
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Your CC is pegged to gold (~$0.128 per CC as of Oct 2024)
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```
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---
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### 2. Internal Movement (Pool 2: CC ↔ TFTF)
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**What it does**: Lets you maintain TFT exposure while holding stable CC
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**How it works**:
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- You earn CC from farming or have CC from services
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- You can convert CC to TFTF (TFT Future) based on current TFT market price
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- TFTF represents a claim on TFT value without holding actual TFT
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- You can convert back to CC when needed
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**Key point**: This allows you to **participate in TFT upside** without immediately exiting to fiat.
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**Example**:
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```
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You earned: 500 CC from farming
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TFT market price: $0.10
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You convert → 500 CC becomes 5,000 TFTF
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If TFT rises to $0.15, your TFTF value increases
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You can convert back to CC at any time
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```
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---
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### 3. Exit to Fiat (Pool 3: TFTF ↔ USDC)
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**What it does**: Provides a controlled bridge to cash out to fiat currency
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**How it works**:
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- You submit a bid in the Dutch auction: amount + minimum acceptable price
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- Bids are sorted from lowest price to highest (most discount to least)
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- System fills bids until reaching the monthly cap (e.g., 5% of total liquidity)
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- Successful bidders receive USDC at the clearing price
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**Key point**: This is **controlled liquidity** - not instant withdrawals. It protects the pool from being drained.
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**Example**:
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```
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You want to exit: 10,000 TFTF (worth ~$1,000)
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You're willing to accept: 20% discount minimum
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Others bid: 15%, 18%, 22%, 25%, 30%
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Clearing price: 22% (your bid gets filled)
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You receive: $780 USDC (after 22% discount)
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Margin benefit: Goes to remaining pool members
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```
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---
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## Traditional DeFi vs. Our Approach
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| Feature | Traditional Liquidity Pools | ThreeFold Position-Based Pools |
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|---------|---------------------------|-------------------------------|
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| **LP Tokens** | Floating value tokens issued | No tokens - fixed positions tracked |
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| **Your Share** | Changes with market volatility | Fixed based on contribution + time |
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| **Exit** | Instant (swap LP tokens) | Controlled (Dutch auction) |
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| **Impermanent Loss** | Yes - you lose value in volatile markets | No - your position doesn't change |
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| **Gaming Risk** | Front-running, sandwich attacks | Protected by time-weighting |
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| **Best For** | Active traders | Long-term supporters |
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---
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## Why Three Pools?
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Each pool serves a distinct purpose:
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```mermaid
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graph LR
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A[User Needs] --> B{What do you need?}
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B -->|Stable pricing for services| P1[Pool 1: TFT→CC<br/>Get stable credits]
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B -->|Keep TFT upside exposure| P2[Pool 2: CC↔TFTF<br/>Maintain position]
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B -->|Cash out for operations| P3[Pool 3: TFTF→USDC<br/>Controlled exit]
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style P1 fill:#e1f5ff
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style P2 fill:#fff4e1
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style P3 fill:#ffe1e1
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```
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### Pool 1: Stability
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Gives you predictable pricing for cloud services without exposure to TFT volatility.
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### Pool 2: Flexibility
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Allows you to move between stable CC and TFT-linked TFTF based on your market outlook.
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### Pool 3: Liquidity
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Provides real fiat exit when needed, with controls that protect all participants.
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---
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## Visual Flow: Complete User Journey
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```mermaid
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graph TD
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START([👤 New User]) --> BUY[Buy TFT on Market]
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BUY --> ENTER[Enter Pool 1]
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ENTER --> LOCKED[TFT Locked + CC Minted]
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LOCKED --> USE{How to use CC?}
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USE -->|Spend on services| SERVICES[☁️ Use ThreeFold Cloud]
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USE -->|Hold as stable value| HOLD[💎 Keep CC]
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USE -->|Want TFT exposure| CONVERT[Convert to TFTF in Pool 2]
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SERVICES --> BURN[CC Burned by Network]
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HOLD --> WAIT[Wait for opportunities]
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CONVERT --> TFTF_HOLD[Hold TFTF Position]
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TFTF_HOLD --> TFTF_USE{What next?}
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TFTF_USE -->|Need stability again| BACK[Back to CC in Pool 2]
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TFTF_USE -->|Need fiat| EXIT[Enter Pool 3 Dutch Auction]
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EXIT --> BID[Submit bid with discount]
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BID --> AUCTION{Bid filled?}
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AUCTION -->|Yes| RECEIVE[Receive USDC]
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AUCTION -->|No| RETRY[Try next auction round]
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BACK --> LOCKED
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WAIT --> USE
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style START fill:#90EE90
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style RECEIVE fill:#90EE90
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style BURN fill:#FFB6C1
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```
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---
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## Key Protections Built In
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### 1. No Unlimited Dumping
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- Exits are capped per period (e.g., max 5% of total liquidity)
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- Dutch auction requires accepting a discount
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- Protects all participants from sudden value crashes
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### 2. Fair Distribution
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- Position-based tracking means early supporters aren't diluted
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- Time-weighting rewards long-term commitment
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- No front-running or gaming the system
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### 3. Sustainable Liquidity
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- Only 50% of total contributed liquidity can ever exit via Dutch auctions
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- Margin from discounts gets redistributed to remaining participants
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- System strengthens with each exit, rather than weakening
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### 4. Transparency
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- All positions are clearly tracked and visible
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- Rules are consistent and applied equally
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- No hidden fees or complex formulas
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---
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## Common Questions
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<details>
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<summary><strong>Can I get my TFT back immediately?</strong></summary>
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Not instantly. You need to:
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1. Convert CC to TFTF (Pool 2)
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2. Exit TFTF via Dutch auction (Pool 3) to USDC
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3. Buy TFT on the market with USDC if you want TFT again
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The original TFT you deposited is locked to back the CC that was minted.
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</details>
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<details>
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<summary><strong>What if I just want stable income from farming?</strong></summary>
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Perfect! Just keep your earnings in CC. You get:
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- Stable value (pegged to gold)
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- No exposure to TFT market swings
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- Ability to convert to TFTF later if you want upside
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</details>
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<details>
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<summary><strong>How do I benefit from TFT price increases?</strong></summary>
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Convert your CC to TFTF in Pool 2. TFTF value tracks TFT market price, so if TFT goes up, your TFTF position becomes more valuable in CC or USDC terms.
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</details>
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<details>
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<summary><strong>What happens to the margin from Dutch auctions?</strong></summary>
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When someone exits at, say, a 25% discount, that 25% margin is collected and redistributed to all remaining liquidity providers proportionally. The longer you hold, the more you benefit from others exiting.
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</details>
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<details>
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<summary><strong>Is this like Uniswap or Curve?</strong></summary>
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Fundamentally different. Traditional AMMs use value-weighted pools with instant liquidity and impermanent loss. We use time-weighted, position-based pools with controlled exits and no impermanent loss. Trade-off: less instant liquidity, more fairness and protection.
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</details>
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---
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## Next Steps
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Now that you understand the overall flow, dive deeper:
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1. **[Token System](/core-concepts/token-system)** - Understand TFT, CC, and TFTF roles
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2. **[Position-Based Liquidity Pools](/core-concepts/position-based-lp)** - Learn why this approach is fair
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3. **[Dutch Auction Exit](/core-concepts/dutch-auction-exit)** - See exactly how exits work with examples
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4. **[Yin-Yang Currency](/core-concepts/yin-yang-currency)** - The philosophy behind dual tokens
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---
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:::tip Simplified Summary
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- **Pool 1**: Get in (TFT → CC)
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- **Pool 2**: Move around (CC ↔ TFTF)
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- **Pool 3**: Get out (TFTF → USDC)
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All three work together to give you **stability**, **flexibility**, and **controlled liquidity**.
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:::
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