Overview

Longship is a protocol that allows any user to create an isolated market for a given token. Each market settles entirely in the token, and employs an oracle (e.g. Chainlink) to enable USD-denominated prices without the need for USDC or funding rates.

Each Longship Market is an automated market maker (AMM) that consists of a single-asset liquidity pool and a utility function. The utility function offers two types of offsetting trade instruments, leveraged long trades and delta-neutral Repo trades.

Longship Markets naturally equilibrate. When there is too much demand for one instrument, Longship offers favorable pricing for the other instrument, and vice versa. In this way, the AMM always stays in balance.

When a market's underlying token price increases, that Longship market owes leveraged long traders more tokens. Meanwhile, the price increase results in fewer tokens owed to Repo trades, since they are only due an amount in USD terms. This differential enables Longship's AMM to "balance its books". Inversely, when a market's underlying token price drops, many leveraged long positions will be liquidated, accounting for the increase in tokens required to payout Repo trades.

Architecturally, Longship implements several innovations and tricks to allow for on-chain utility evaluation of an arbitrary number of positions at an array of future price points. Doing this natively requires users to perform these computations off-chain, relying on Longship only to accept correct results and reject incorrect results. A front-end UX can easily abstract this process away from users. For a technical explanation of how this works, check out the mathematical overview page.