Staking: Security Module

Avantis Security Module

The Avantis Security Module (SM) is a mechanism designed to protect the protocol LPs against major shortfall events.

Avantis token holders can opt-in by staking their tokens in the SM. In return, they earn protocol rewards, XP boosts and fee discounts— but accept the theoretical risk of slashing if the module is activated to cover a loss.

Rewards

$AVNT stakers are integral to the safety of protocol LPs. In exchange they receive:

• AVNT Rewards: Stakers get additional $AVNT for securing the protocol. This will be available as soon as AVNT claims go live.

• Coming soon: Over the coming days and weeks, we will be releasing the following upgrades to $AVNT:

  • XP boosts: In Season 3, the only way to attain boosts on accumulating XP is by staking $AVNT. Every Avantis user who stakes $AVNT is already accumulating XP boosts in Season 3. This XP boost will be retroactively reflected once Season 3 officially goes live on our UI. This XP will translate into future airdrops, giving the highest share of $AVNT to the most loyal stake (stakers get a max boost of 3x, weighted by stake duration and amount).

  • Fee discounts: Traders can stake AVNT to get up to 40% discount on both fixed-fee and ZFP (profit sharing perps). This is to ensure maximum alignment between $AVNT with Avantis' trading community.

  • Governance: Decide the future of value accrual for $AVNT. Everything from buy-backs / burns, expansion to new chains, changes to fee economics, and more.

Staking Risk: Slashing

Avantis' liquidity providers are effectively taking the opposite side of trading activity. During extreme market volatility, there can be situations in which OI (open interest) gets skewed one way for a short time, and the market price action goes one way too. This can cause impermanent loss for LPs (same as in a DEX pool when prices diverge). If LPs pull capital out during these times, they can realize this loss. Avantis has a strong buffer to safeguard against these types of principal drawdowns (the buffer itself builds up during the normal course of trading activity via trading fees).

Slashing is only activated if the vault buffer ratio drops <0.95 and the entire LP loss is realized because traders close their trades (i.e a >=5% immediate loss to LPs). The maximum stake that can be slashed is 20% of staked AVNT. However in the history of the protocol:

• Max realized single day share price drawdown for LPs has only been 30bps (0.30%)

• Since august 2024, there have been realized LP losses at all (see attached share price chart which shows linear growth without any downturns i.e no realized losses).

This means in the operating history of the protocol there has been no hypothetical slashing event (had AVNT been live on day 1 of mainnet). We also have a healthy protocol treasury, which can be used to fill the buffer. It's also worth noting that the "max slashing" parameter of 20% (i.e the max % of staked tokens that can be slashed, is 20% of stake at most).

To summarize - slashing is an extremely low probability event, reserved for long-tail events when the protocol's treasury cannot cover large, realized losses to LPs.