Accounting Model

It is this mechanism that ensures solvency. The exchange rate for adding and removing liquidity is the ratio of the total collateral in the pool to the total number of liquidity tokens in circulation.

Each Sustate Finance Pool uses a unique pool liquidity token to account for PnL positions. All closed positions are paid in liquidity tokens, which means that all traders become implicit LPs when a position is opened and become explicit LPs when a position is closed.