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 perpetual futures (GMX on Arbitrum, Hyperliquid on HyperEVM) to establish leveraged positions. Used for altcoins, bear (short) tokens, and HyperEVM-deployed exposures to commodities and equity indices.

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