Overview

Toros leveraged tokens are ERC-20 tokens with built-in leverage. They provide amplified exposure to an underlying asset without the need to manage margin, collateral, or liquidation risk manually.

What Are Leveraged Tokens

A leveraged token targets amplified exposure to the price movement of its underlying asset. A 2x long Bitcoin token aims for roughly twice Bitcoin exposure, while a 3x token targets roughly three times exposure.

Leveraged tokens differ from perpetual futures in an important way: position size grows with profits. Returns compound during trends, meaning a sustained uptrend produces more than a simple multiple of the move.

For example, if Bitcoin increases 50%, a 3x leveraged token generates approximately 237% returns rather than the 150% a simple 3x multiplier would suggest. This is because profits are continuously reinvested into the leveraged position.

Why Traders Use Them

• Simplicity: Hold an ERC-20 token instead of managing a leveraged trading position

• No liquidation management: Automated rebalancing reduces effective leverage as prices decline, significantly reducing liquidation risk. Toros reports no forced liquidation events in over 4 years of operation.

• Compounding returns: In trending markets, compounding amplifies gains beyond a simple leverage multiple

How Toros Builds Leveraged Tokens

Toros uses two different mechanisms to create leveraged tokens:

• Money Market-Based: Uses Aave lending and borrowing to build leveraged positions. Primarily used for major assets like BTC and ETH.

• Perpetuals-Based: Uses GMX perpetual futures to establish leveraged positions. Used for altcoins and assets with limited lending market liquidity.

Both mechanisms include automated rebalancing to maintain the target leverage ratio as market conditions change, rather than relying on a fixed daily reset.

Important: Not for Passive Holding

Leveraged tokens are designed for short to medium-term positions where you have a directional view. They are not buy-and-hold products. In sideways or choppy markets, volatility decay erodes value over time. Active monitoring is recommended.

Important Risks

• Volatility Decay: Repeated rebalancing erodes value in sideways or choppy markets. Leveraged tokens perform best during clear trends.

• Slippage: Large trades or low-liquidity conditions can result in execution prices that differ from expectations.

• Costs: Interest expenses (money market-based) or funding payments (perpetuals-based) reduce returns over time.

Further Reading

• Available Tokens for the full product catalogue

• Protected Leveraged Tokens for leveraged tokens with downside protection