Liquidity provider's portfolio

At a ratio similar to the time when a user provided the liquidity (0.49 in our example), liquidity tokens represent the claim on 100 DAI and 96.078 +ve fCash. But if the pool proportion changes from the initial, the liquidity token claims would also change. This change in liquidity token claims would create a net fCash position for the liquidity provider.

Context: Liquidity provisioning

Net fCash position for a liquidity provider.

Positive fCash is a coupon to claim the principal + interest and it is usually held by a lender (one who invests in the bonds).

Negative fCash is an obligation to pay back to the lender (investor). It is usually held by a borrower.

Context: What & Why fCash?

With the above context, it is clear that if a user's portfolio has higher -ve fCash (obligation) than +ve fCash (claim on Cash), the user is in a net borrowing position. If the inequality is reversed, it would be a net lending position.

Liquidity tokens represent a claim on Cash and +ve fCash in the liquidity pool based on the current ratio. So if the fCash proportion changes from 0.49, the user would no longer get the 100 DAI & 96.078 +ve fCash but receive different quantities.

Now if the fCash ratio in the pool is lower than 0.49, when the user redeems their tokens they will receive greater than 100 DAI (initial deposit) and less than 96.078 +ve fCash (initial deposit). This would create a net borrowing position (obligation) in a user's portfolio because -ve fCash > +ve fCash in their portfolio.

Similarly, with the same logic, if the fCash ratio in the pool is greater than 0.49, it would create a net lending position in a user's portfolio because -ve fCash > +ve fCash in their portfolio.

Liquidity providers have an option (default) to swap their net fCash position into Cash to facilitate simplified withdrawals. This swap is subjected to a liquidity fee similar to that paid by Borrowers and Lenders.