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**FAQ**

**1.  Where does the yield come from?**
In order to answer this question we first need to understand the different types of yield/fees the protocol generates. 

There are two different types of yield to be considered:
Trading fees from providing liquidity in the USDC/ETH pool
Liquidity captured by the protocol through bonding
	
**Trading Fees**
100% of the funds deposited in the protocol are converted to Uniswap liquidity and therefore are continuously generating fees from trades. Tthe only time the protocol does not generate trading fees is if ETH’s price goes below or above the $500 - $10,000 range

**Captured Liquidity**
When a user creates a bond, they need to wait for the bond to mature. An important aspect to understand is that the bond never matures 100% due to the nature of the accrual schedule function, which is asymptotic. So if the user converts the bond they will never receive 100% of their initial principal back (they do if they cancel the bond) which means that whenever a user converts a bond, a portion of their initial deposit (principal) will be captured as protocol owned liquidity and later distributed as yield. 

Compared to other bonding protocols (Olympus DAO and many of its clones), where the user exchanges their bond deposit for a discounted amount of newly minted protocol tokens, Exit10 bonders receive EXIT tokens, which can be exchanged pro rata for 70% of the acquired liquidity during bonding.

**2.  Why would someone create a bond if they are guaranteed to lose a part of their principal?**
A user will create and convert a bond if they believe the return from the amplified Uniswap yield together with the Exit token value they receive will be greater than the amount discounted due to the accrual schedule mechanism and the renounced trading fees their principal produced while the bond was maturing.

**3.  Can I lose money when I bond?**
When a user bonds, the deposit amount is automatically converted to liquidity in the Uniswap USDC/ETH pool. The fees that are generated from their deposit during the bond maturity is forfeited and distributed to other protocol participants.

A portion of the principal is only subtracted from the initial deposit if the user converts the bond to Boosted LP tokens. 

If the user cancels the bond, the protocol removes the original liquidity deposited in Uniswap and returns the funds as USDC and ETH to the user. This means the user will receive a different USDC and ETH amount than when they originally deposited if the price of ETH has changed relative to USDC.

**4. Who gets to keep the yield my principal produces while I’m waiting for the bond to mature?**
The trading fees produced by the liquidity being provided while a user awaits for their bond to mature is divided as follows:
Bootstrap participants (20%)
Team and Early Backers (20%)
Boosted LP stakers (60%)



**5. Who gets to keep the amount subtracted from my original deposit (principal) once I convert my bond to Boosted LP tokens?**
The amount acquired by the protocol from converted bonds is divided as follows at the Exit phase:
Bootstrap participants (10%)
Team and Early Backers (20%)
Exit token holders (70%)

**6. If the protocol pays some users from a portion of my original deposit can this be considered a Ponzi?**
No. Exit10 does not require new participants to join in order to distribute higher yield per liquidity amount provided in Uniswap V3. 
 
The amount subtracted from the original deposit after a bond conversion is a **fee** that is charged to the user by the protocol for minting Boosted LP tokens which is charged proportionally to the amount of time the bond matures.

This fee, which is now considered protocol owned liquidity, continuously generates trading fees to Boosted LP stakers and it’s only distributed to other protocol participants once ETH reaches $10k.

This means that the protocol does not depend on new users depositing funds in order to generate **yield to stakers**. As a matter of fact, if there was only one participant in Exit10, they would still receive a higher fee, on the same amount of liquidity **backed by their stake**, than on Uniswap at the same price range.

Of course this would make **very little sense** since they would be **giving up a part of their principal** in order to use that as the source for the extra yield on their now **diminished staked amount**.

**7. How can you guarantee stakers will always receive higher fees on their liquidity than vanilla LP providers?**
Boosted LP stakers will always receive higher fees on their liquidity relative to vanilla LP providers precisely because they are charged a fee on their principal when they convert their bonds.

Boosted LP holders gave away part of their initial deposited `liquidity` (aka principal) to the protocol once they converted the bond. The amount that they give up, is determined by the accrual schedule parameter and the time it takes for their bond to mature. An important aspect is that the bond never matures 100% due to the nature of the accrual schedule function, which is asymptotic. So if the user commits to the bond they will never receive 100% of their initial principal back, but whatever amount they receive in return will 100% receive better yield than if they were to deposit vanilla in Uniswap v3.

The amount they **don't receive** when they convert the bond to Boosted LP tokens goes to the Exit bucket and produces "extra" yield to the amount they actually receive. Hence they will be getting a higher APR on the actual underlying.

So where does the extra yield come from? From the portion of the principal they gave to the protocol in exchange for the extra yield. Of course if they are the only ones using the protocol, that would not make much sense. After all, they are giving up their own principal in order to use it as the source of extra yield to their now **diminished** original deposit.

**8. What is the point of this protocol?**
Below are some of the reasons the protocol exists:
It allows Open Bakery, the team behind the protocol, to showcase some of their work and create a brand name for themselves.
It is a way to raise funds so we can continue building into the future without having to rely on the classic VC route.
Generate amplified yield on a broader range which typically pays less than tighter ranges which are subject to constant repositioning.
A fun way to speculate on the future price of ETH and how long it will take for it to reach $10K.
Experiment with different protocol parameters in the wild so we can gather data for possible future protocol improvements.

**9. If I think ETH is going to 10K why would I provide liquidity in Uniswap and lose all my potential gains to impermanent loss if I can just leverage ETH and go straight to Valhalla?**
Exit10 is not intended to be the place one would park their net worth. Different investment strategies come with different risk profiles. Going all in 50x leverage on ETH because you are certain ETH will reach $10K might not be the best strategy if you consider ETH could drop in price abruptly and liquidate your position leaving you with nothing. 

On the other hand, going all in on a long range Uniswap position because you think the amplified yield will make up for the impermanent loss might also turn out to be a bad idea if ETH simply shoots straight up to 10K leaving you with very little earned fees and no exposure to the asset you were so bullish on. 

The most appropriate strategy will be the one considering the risks you, as an investor, are willing to take.

Below are some example strategies that could be considered when participating in Exit10:

> **Conservative**
Even though Alice is bullish ETH long term, she has no idea how long it will take for ETH to reach $10K. She decides to allocate her portfolio in a way that maximizes return but also minimizes risk:
>
> **50% Vanilla ETH** (In case ETH shoots straight up)
**30% USD for buying the dips** (In case there are some pull backs)
**20% Exit10 to stack ETH** (In case the market crabs for a long time)

> **Double Dipping**
Bob is a DeFi native and pretty sure ETH is going to $10K, but he has no idea how long it will take to get there. He takes advantage of the decentralized lending markets available and decides to keep 100% ETH exposure while borrowing a conservative amount of USDC to earn extra yield on Exit10 while he waits.
> 
> **100% ETH on Aave**
**30% Borrowed USDC in Exit10** earning extra ETH while also speculating on Exit tokens.

> **Triple Dipping**
Charlie is not risk averse. He knows ETH is ultra sound money and that the supply dynamics have forever changed in favor of ETH’s price since the merge. He has no idea when ETH will be $10K but he wants to make sure to be stacking ETH while he waits. 
> 
> **100% of staked ETH on Aave**
> 
> **50% of USD borrowed** 
> - **20% of the borrowing USD to buy more staked ETH** and deposit in Aave (Leverage long staked ETH)
> - **10% Exit10 bootstrap** (In case Exit10 is a massive success and lasts a long time)
> - **20% Exit10 bonding** (Extra yield on Uniswap and Speculate with Exit tokens)

As can be shown by these examples, none of the users were less bullish ETH and yet all of them were able to accommodate their risk profiles and participate in Exit10.


**10. What is the best strategy?**
Because Exit10 depends on many unpredictable variables it is impossible to conceive of a perfect strategy. What we can offer is some of the things to consider before choosing a strategy.

- Is ETH going to reach $10K in a short or long timeframe?
- Will there be a lot of funds deposited in the Bootstrap phase?
- What will be the final redeemable price of EXIT?
- What is the current APR for being a liquidity provider in the Uniswap 500 - 10,000 range?
- Will the APR most likely increase or decrease in the future?
- Will the higher Exit10 APR compensate for the added smart contract / bond risk relative to Uniswap v2? Will users migrate?
- What are the chances of ETH reaching $10K


**11. What are the different ways I can participate in Exit10?**
There are 3 different ways that a user can participate in Exit10, it is important to understand that these are not mutually exclusive and that they could simply complement and not substitute other strategies you might be considering if you are bullish ETH long term.

- Become a Bootstrapper and earn extra protocol fees.
- Provide liquidity and earn higher Uniswap yield by staking Boosted LP tokens.
- Farm EXIT and exchange it for a portion of protocol earned liquidity.


**12. Can I lose money if I participate?**
Yes. If a user simply converts a bond to Boosted tokens and redeems it for the underlying without staking and earning amplified yield, **they will lose** a portion of their principal.

When a bond is converted to Boosted LP tokens a portion of the principal is acquired by the protocol according to the bond accrual schedule. The longer a user waits for the bond to mature (according to the accrual schedule curve) the less will be acquired by the protocol. The downside of waiting too long is that while users wait for the bond to mature, they are renouncing the Uniswap fees being generated from the bond deposit.

On the other hand, if they stake Boosted LP tokens and the amplified yield compensates for the principal loss, then bonders only lose the potential yield they renounced, which can also be compensated depending on the duration of the stake and the increased APR.

Another important aspect of the bonding process is the EXIT token which is minted to bonders and can be redeemed by protocol acquired liquidity at the final stage. The amount claimed can also be a means of compensation for any loss during bond conversion.

**13. What if ETH never reaches 10K?**
Since Exit10 is an immutable smart contract with no governance parameters, If ETH does not reach 10K the protocol will continuously run forever as intended.

**14. What if Uniswap launches v4 before ETH reaches $10K and all liquidity is migrated over?**
Uniswap v3 has been deployed for over one year and there is still over 70M of liquidity in the ETH/USDC pool on Uniswap v2. Given this reality it is very likely that there will still be a considerable amount of liquidity in Uniswap v3. 

Even if 100% of the liquidity migrates, the deposits from the Bootstrap phase will still generate fees for bonders, this is because Ether is the second most liquid cryptocurrency by market cap and there will be always arbitrage opportunities in the ETH/USDC pair for as long as there is volatility.

**15. In what chains will Exit10 be launched?**
Ethereum and Arbitrum. The two chains with most of the liquidity for the ETH/USDC pair. 
 
**16. What are the differences between the different chain versions?**
The accrual schedule will be longer on Ethereum mainnet, requiring a minimum of 4 weeks of bonding in order for a user to claim at least 80% of their principal. On Arbitrum it will only take 4 days to reach the same bond maturity.

**17. Why was the $500 to $10,000 range chosen?**
In order to avoid repositioning the liquidity on different ranges a broad enough range was chosen. Since it is not possible to predict the low range for ETH the $500 mark was chosen since it is below the current cycle’s bottom and a nice round number. 

**18. What happens if ETH goes below $500?**
All liquidity represented in the Exit10 position goes out of range and stops earning trading fees until ETH goes back above $500.

**19. What happens if ETH just goes above $10,000 and then comes back into range after Exit10 has been called?**
The liquidity from bootstrap deposits and any liquidity acquired by the protocol is removed from the position and distributed according to the smart contract rules.
Any liquidity still in the position, either from Boosted LP token holders or active bonds will still earn fees which are then distributed to the Protocol Guild.

**20. Why was the USDC/ETH pair chosen?**
Because it is the USD/ETH pair with the most liquidity.

**21. Are you planning on launching the protocol for other pairs?**
Even though this is a possibility, right now we are 100% focused on Exit10.

**22. Why was such a wide range chosen if the returns are so poor compared to tighter ranges?**
Because of the desire to minimize the risk of permanent loss from updating the position range.

**23. Why not use smaller ranges and invest the underlying unused liquidity to maximize profits instead of the current design?**
Because of the added risk in utilizing any unused liquidity.

**24. Why were correlated assets like staked ETH/ETH or USDC/USDT where there is little impermanent loss not chosen as the main protocol pool?**
One of the objectives of Exit10 is to showcase some of the work by Open Bakery, because of its memetic value and controversial nature we felt that Exit10 would be best positioned to generate awareness. This does not mean that correlated asset pools will not be deployed in the future.

**25. What are the risks?**
As with any money protocol, there are smart contract and economic risks derived from the actual protocol rules. Just because the rules are immutable and known in advance, it does not mean that the economic risk is equal throughout the protocol lifecycle. Depending on the state of the protocol a user doing the exact same action as another user in a different timeline could yield very different results.

**26. Who's behind the project?**
The Open Bakery team has been working together for over a decade in various web2 projects. We have finally decided to commit full time to value driven immutable code because of all the exciting new possibilities it offers.

**27. Why LP and not other yield bearing protocol/mechanism?**
The only other yield bearing mechanism which would satisfy the risk and yield requirements would be liquid staking ETH, but because of the Lindy of Uniswap and memetic value of ETH10K this version was chosen.

**28. Was it audited?**
Yes. Exit10 was audited by yAcademy at block 5 over 14 days by 2 Residents and 25 Fellows.

**29. What's in it for the team?**
During our last build cycle, we found ourselves spending a lot of potential dev time thinking about how we could raise funds for some of the tools we were building. We think a lot of these tools add value to the ecosystem but are not necessarily marketable. Given that reality, we decided to pause what we were working on and see if we could raise funds in a different way. This is how Exit10 was born.

**30. Did Exit10 raise funds privately?**
Exit10 did have a small friends and family raise. Audits are a must if you take smart contract security seriously and they do come with a price tag. We also hope that the quality of the code and user interface will be able to reflect the time we were able to devote exclusively to the protocol because of this raise.


