The Overlay mechanism is simple: users enter positions by locking up OVL tokens in long or short positions on various data streams offered by the protocol. Data streams are obtained via manipulation-resistant oracles. When a user exits that same position at a later time, the protocol dynamically mints/burns OVL based off of their net profit/loss for the trade. The contract then credits/removes OVL tokens from the user's balance and adds/subtracts from the total existing supply of OVL.
It’s not active at the moment. Once we launch transferable ERC-721 tokens, you will be able to transfer your ERC-721 position off Overlay to wherever you wish, be it a smart contract or another user. This position token stores a reference to the position’s entry price P_i, the leverage L, the side S, and the amount N of OVL locked by the user along with other metadata about the position.
To trade on Overlay, you’ll need OVL tokens and ETH for gas fees. You can swap ETH for OVL through a Uniswap or SushiSwap spot OVL-ETH liquidity pool.