> For the complete documentation index, see [llms.txt](https://wolf-patch.gitbook.io/wolf-patch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://wolf-patch.gitbook.io/wolf-patch/what-is-wolf-patch.md).

# What is Wolf Patch?

{% hint style="success" %}
**Wolf Patch: The First Yield-Based Memecoin on Avalanche**

Wolf Patch (WP) is the first yield-based memecoin created on the Avalanche network. Unlike other meme projects, WP features centralized liquidity, meaning it buys and sells liquidity to maximize returns. The majority of these earnings are used for WP buybacks, which are then swapped to sWP (staked WP). This mechanism, represented as \<WP/sWP>, ensures that holders of WP benefit from price appreciation, while those staking WP earn higher APY.
{% endhint %}

## WP-AVAX Pool Strategy for Bull and Bear Markets

In a bull market, the WP pool is converted into an LP with AVAX. Assuming a **1000% increase**, a region between **700% and 900%** is selected to convert the LP into stablecoins. Here's how we structure the pool:

### Step 1: Convert LP to Stablecoins

* **Target Region**: We define a region between **700% to 900%** as the optimal range to convert LP to stablecoins.
* **Amount Converted**: For instance, if the LP increased by **1000%**, we would start converting within this range to capture the gain.

$$
\text{Stablecoin Conversion Range} = 700% , \text{to} , 900% , \text{increase}
$$

### Step 2: Allocate LP for Staking

* **10% of the LP** is allocated to launch a new staking mechanism.
* The WP portion in this pool is swapped for sWP to **increase the APY**, while the AVAX portion is converted into assets like BTC/USDC to open a sWP staking pool.

$$
\text{Staking Allocation} = 10% , \text{of LP}
$$

### Step 3: Prepare for Bear Market

The **remaining 90% of the LP** is divided and handled in different ways to prepare for the bear market:

#### 1. **5% Multisig Fund**:

* **5%** of the LP is placed into a multisig wallet at the end of the bull run or at our predicted top. This portion is held without being touched and remains as a liquid asset against AVAX.

$$
\text{Multisig Fund Allocation} = 5%
$$

#### 2. **25% Stablecoin LP**:

* **25%** of the LP (if it is AVAX/WP) is converted into stablecoins like USDC and held as a stablecoin LP.

$$
\text{Stablecoin LP Allocation} = 25%
$$

#### 3. **60% Bear Market Hedge**:

* The remaining **60%** of the LP is dismantled:
  * The WP portion remains untouched.
  * The AVAX portion is converted into stablecoins like **USDC/DAI.e**.
  * These stablecoins are then lent on platforms like **BenQi** or **Aave** with **1.5x leverage**.

$$
\text{Hedge Allocation} = 60%
$$

**Leverage Strategy:**

We borrow AVAX using the lent stablecoins, sell the AVAX, and deposit the stablecoins back into lending platforms. This creates a hedge against the bear market.

$$
\text{Leverage} = 1.5 \times \text{borrowed AVAX}
$$

### Step 4: Exiting the Bear Market

Once we believe the bear market has ended, the following actions are taken:

* Lending is reversed, and the WP/AVAX LP is reestablished.
* **50%** of the gains from leverage are used for a **WP buyback**, and the remaining **50%** is used to create new LPs with WP.

$$
\text{Buyback} = 50% , \text{of leverage gains}
$$

$$
\text{New LP Creation} = 50% , \text{of leverage gains}
$$

### Conclusion

This strategy helps us create a hedge fund for the bear market while keeping WP's price stable. Through this process, we aim to establish a sustainable memecoin funding mechanism.

{% hint style="success" %}
Calm down, trust the patch.
{% endhint %}