BasicsBeginner5 min read

Understanding L/S Tokens: The Building Blocks of Synthetic Assets

How paired Long and Short tokens create synthetic exposure

A comprehensive guide to how Continuum's L/S token mechanism works, why they're paired, and how to use them effectively.

Step-by-Step Guide

The Pairing Concept

When you mint at Continuum, you receive BOTH a Long token and a Short token. Together, they always equal your deposited stablecoins. If you deposit 100 USDC, L + S = 100 USDC at any point.

Think of it like matter and antimatter - they're created together and can be destroyed together.

How Values Change

As the underlying asset price changes, value flows between L and S. If gold rises 10%, the Long token gains value that the Short token loses. Total value stays constant.

This is a zero-sum system - every dollar gained by L is lost by S.

Getting Directional Exposure

To go long: sell your S token on a DEX. To go short: sell your L token. The remaining token gives you directional exposure.

You can also buy L or S directly on DEXs without minting.

Redemption Mechanics

To redeem, you need equal amounts of L and S tokens. Burn them at Continuum to receive stablecoins at oracle price. This is how the peg is maintained.

If you only have L tokens, you need to buy S tokens to redeem (or vice versa).

Composability Advantage

L/S tokens are standard SPL tokens. Use them as collateral, trade on any DEX, integrate into DeFi strategies. They're primitives for building complex positions.

This is what makes Continuum different - tokens work everywhere, not just on one platform.