Overlay ProtocolPrice

(OVL)

Unlike leading decentralized exchanges or order book-based platforms, Overlay users trade directly against the protocol itself. The protocol acts as the sole counterparty for every position. This unique mechanism enables "counterparty-free" trading on data streams and assets that are typically too illiquid for traditional platforms. By removing the need for an external liquidity provider or a matching buyer/seller, Overlay allows users to take positions on niche markets without the constraints of traditional market depth.

Overlay focuses on "predictable data streams" rather than traditional liquid assets. Users can trade on a wide variety of unconventional markets, including Bitcoin hash rates, ETH gas prices, NFT floor prices, e-sports statistics, and "long-tail" crypto assets. Because the protocol doesn't require an order book or external liquidity, it can support any data stream that can be reliably verified through decentralized oracle networks, providing access to markets that are otherwise unavailable on standard exchanges.

The "Litter Box" was Overlay’s initial mainnet launch phase designed as a "sandboxed" environment. It operated with a limited token supply and lower risk parameters to ensure safety during the early stages. This phase allowed the community and developers to test the protocol’s economic model and the mint-and-burn mechanism in a real-world setting, ensuring the system functioned correctly before moving to a full-scale deployment.

The OVL supply is dynamic and tied directly to trader performance. When a trader wins a position, the protocol mints new OVL tokens to pay out the profit. Conversely, when a trader loses, the OVL used as collateral for that trade is permanently burned. This means if traders are collectively profitable, the supply increases (inflationary); if they lose more than they win, the supply decreases (deflationary). Funding rates are utilized as a balancing tool to manage this supply over time.

To protect against "black swan" events and excessive inflation, the protocol implements several risk management tools. These include Payoff Caps, which limit the maximum profit a single trade can achieve, and Open Interest (OI) Caps, which restrict the total size of positions allowed on one side of a market. Additionally, the protocol uses price impact and slippage simulations to prevent large players from manipulating the system via oracle data, ensuring the integrity of the mint-and-burn model.

Staking OVL grants users governance rights and a share of protocol fees. Long-term commitment is rewarded through a multiplier effect where locking tokens for extended periods significantly increases voting power and rewards. Regarding community airdrops, such as the "Hotpot" or "Alpha" campaigns, eligibility typically requires active participation in the protocol's ecosystem. Users often need to accumulate participation points or have been active during the "Litter Box" phase to qualify for these incentives.