Examples

In this section, we walk through some concrete scenarios of how short selling trades and earnings happen on the Particle protocol.

Setup

A supplier provides her BAYC #9307 to Particle, and she specifies a 30% APY and 32 ETH in collateral. Let's suppose the current floor price of BAYC is 30 ETH. A trader now provides 2 ETH as the margin to sell this supplier's BAYC to the floor.

Scenarios

Now let's consider the following four scenarios:

Profit. BAYC floor drops to 25 ETH, and 1 ETH interest has accrued over time. The trader decides to take the profit.
- The trader can use Particle frontend to buy a floor BAYC #268 with 25 ETH (trader only pays gas, Particle contract makes the actual purchase). The supplier now gets BAYC #268 and the 1 ETH interest. The trader gets 30 - 25 (price difference) + 2 (margin) - 1 (interest) = 6 ETH, with 4 ETH as the realized profit.
Loss. BAYC floor increases to 31 ETH, and 0.5 ETH interest has accrued over time. The trader decides to stop the loss.
- Through Particle frontend, the trader can buy a floor BAYC #268 with 31 ETH. The supplier now gets BAYC #268 + 0.5 ETH interest. The trader gets 30 - 31 (price difference) + 2 (margin) - 0.5 (interest) = 0.5 ETH, with -1.5 ETH as the realized loss.
Refinance. Another supplier provides BAYC #268 to Particle, with an offering of 20% APY and 33 ETH in collateral. In the original position, 0.2 ETH interest has accrued over time.
- The trader can refinance through Particle frontend, adding 1 ETH to the margin. The original supplier gets BAYC #268 and 0.2 ETH interest. The interest accrual stops for the original supplier and begins for the new supplier.
- By default, with the BAYC #268, the original supplier continues the 30% APY and 32 ETH desired price to new traders.
- Suppose floor of BAYC then drops to 25 ETH and 0.1 ETH interest has accrued on the new position, the trader can buy BAYC #1077 at floor, receiving 30 - 25 (price difference) + 3 (total margin) - 0.3 (total interest) = 7.7 ETH, with 4.7 ETH as realized profit.
Auction. 1 ETH interest has accrued over time, and the supplier decides to start auction. The auction lasts 36 hours, with a buy price linearly increases from 0 ETH to 32 (position locked amount) - 1 (accrued interest) = 31 ETH. Let's consider two branches of possibilities: auction concludes with or without a buyer.
- At around hour 30, someone accepts the offer of 25.8 ETH to provide BAYC #268. Then the supplier gets BAYC #268 + 1 ETH interest. The trader gets 30 - 25.8 (price difference) + 2 (margin) - 1 (interest) = 5.2 ETH back, with 3.2 ETH realized profit.
- If the auction concludes and no NFT accepts the offer, the supplier can withdraw 32 ETH as collateral, and the trader loses the margin (-2 ETH loss).

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Last updated 1 year ago

Scenarios

Now let's consider the following four scenarios:

Profit. BAYC floor drops to 25 ETH, and 1 ETH interest has accrued over time. The trader decides to take the profit.

The trader can use Particle frontend to buy a floor BAYC #268 with 25 ETH (trader only pays gas, Particle contract makes the actual purchase). The supplier now gets BAYC #268 and the 1 ETH interest. The trader gets 30 - 25 (price difference) + 2 (margin) - 1 (interest) = 6 ETH, with 4 ETH as the realized profit.

Loss. BAYC floor increases to 31 ETH, and 0.5 ETH interest has accrued over time. The trader decides to stop the loss.

Through Particle frontend, the trader can buy a floor BAYC #268 with 31 ETH. The supplier now gets BAYC #268 + 0.5 ETH interest. The trader gets 30 - 31 (price difference) + 2 (margin) - 0.5 (interest) = 0.5 ETH, with -1.5 ETH as the realized loss.

Refinance. Another supplier provides BAYC #268 to Particle, with an offering of 20% APY and 33 ETH in collateral. In the original position, 0.2 ETH interest has accrued over time.

The trader can refinance through Particle frontend, adding 1 ETH to the margin. The original supplier gets BAYC #268 and 0.2 ETH interest. The interest accrual stops for the original supplier and begins for the new supplier.
By default, with the BAYC #268, the original supplier continues the 30% APY and 32 ETH desired price to new traders.
Suppose floor of BAYC then drops to 25 ETH and 0.1 ETH interest has accrued on the new position, the trader can buy BAYC #1077 at floor, receiving 30 - 25 (price difference) + 3 (total margin) - 0.3 (total interest) = 7.7 ETH, with 4.7 ETH as realized profit.

Auction. 1 ETH interest has accrued over time, and the supplier decides to start auction. The auction lasts 36 hours, with a buy price linearly increases from 0 ETH to 32 (position locked amount) - 1 (accrued interest) = 31 ETH. Let's consider two branches of possibilities: auction concludes with or without a buyer.

At around hour 30, someone accepts the offer of 25.8 ETH to provide BAYC #268. Then the supplier gets BAYC #268 + 1 ETH interest. The trader gets 30 - 25.8 (price difference) + 2 (margin) - 1 (interest) = 5.2 ETH back, with 3.2 ETH realized profit.
If the auction concludes and no NFT accepts the offer, the supplier can withdraw 32 ETH as collateral, and the trader loses the margin (-2 ETH loss).