Insurance Pool Payments Fix
Who is this post for?
We direct this post at the Bitcoin Trading Protocol’s (BTP’s) insurance pool liquidity providers.
The BTP Foundation is the UK non-profit that is responsible for maintaining the Bitcoin Trading Protocol (BTP). The vision of the BTP is to be an open protocol that manages trade settlement and liquidity provisioning for independent trading platforms such as DXS.
Did you change your name recently?
Yes! We used to be TDXP and we’re in the process of rebranding to DXS. We decided to make the change due to TD Bank Group contesting our TDXP EU trademark application.
Read this post if you’d like to learn more.
What happened?
In November 2021, we discovered that the daily liquidity payments to BTP liquidity providers (LPs) were incorrect. We are taking this opportunity to apologize to LPs as well as cover how the error was resolved.
BTP insurance pool liquidity providers (LPs) are paid 3% of all realized losses that occur on all trading platforms that connect to the BTP (currently only DXS). The BTP pays LPs proportionally based on the total amount of principal to be returned by the BTP.
From the BTP’s inception until November 2021, LP payments were incorrectly being paid proportionally based on the total amount of principal and interest to be returned by the BTP.
The result of this error was that earlier LPs were paid a total of 266 BSV more than they should have been and later LPs were paid a total of 266 BSV less than they should have been.
How did we resolve this?
- We fixed the LP payment logic
- We calculated the total payment shortfall for each LP (what they should have received minus what they actually received)
- We paid the shortfall out to each LP over a period of 4 months (in addition to their daily payment of their proportional share of 3% of realized trading losses)
Please note:
- The shortfall payments were paid out in their entirety by March 16 2022
- The shortfall payments were paid from the insurance pool’s surplus (see next section for the current state of the insurance pool)
- The LPs that were overpaid were not (and will not be) penalized
What is the current state of the insurance pool?
As at 4 April 2022:
- Insurance pool size = 33,596 BSV
- Liquidity provided = 24,821 BSV
— LP payments received = 2,669 BSV = 10.7%
- Insurance pool surplus = 8,775 BSV
— 96% of realized trading losses have exceeded total realized trading profits by 8,775 BSV over the lifetime of the BTP and DXS
