Pooling
Liquidity Pools
Last updated
Liquidity Pools
Last updated
Ref Finance offers , Classic, Stable, Rated, and DCL. Classic pools are based on the Uniswap v2 algorithm; Stable pools, which can contain two or more tokens, use Curve's StableSwap algorithm; Rated pools are for yield-bearing tokens, and are based on a variation of Curve's StableSwap algorithm; and , which are based on .
Classic pools are fully permissionless, meaning that anyone can create a Classic pool, and set the fee for that pool. Currently only can create Stable, Rated, and DCL pools.
Stable Pools are designed for assets that are expected to regularly trade either very close to parity or at a predetermined exchange rate. The Algorithm design is based on (introduce by Curve Finance), which enable significant size swap to occur without triggering considerable price impact, greatly enhancing capital efficiency for swaps involving similar or correlated assets.
Ref Finance offers a variety of pool types, including:
4 pools: support USDT Native, USDC Native, USDT.e and USDC.e
3 pools: USDT.e, USDC.e and DAI
Correlated Assets: tokens that swap near 1:R with some slowly changing exchange rate R (stNEAR, LINEAR, NearX)
To understand more about logic design behind the contracts, refer to this from the Curve Finance Team.
Degen pools aim to enhance the trading experience by providing minimal swap price impact on volatile pools.
These pools are seeded with one volatile and one stable asset or two volatile assets but they employ the instead of the Constant Product one. This choice enables traders to achieve an unparalleled efficiency as they can swap one asset for another at a 1:1 dollar ratio with little to no price impact.
In standard market conditions, degen pools are expected to gather a much higher trading volume than their standard counterparts.
Assume there are two XYZ/USDC pools. One uses the Constand Product AMM and the other, the degen pool, uses the Stableswap AMM. Assume the pool TVL is $ 2 mln and that XYZ trades at 10 USDC.
A trader that wants to swap 50,000 USDC for XYZ would receive 4,762 XYZ by swapping in the standard pools and approximately 5,000 XYZ by swapping in the degen pool. The higher swap efficiency of the degen pool amounts to 5% (5,000 / 4,762 -1 ) in this specific case, without considering swap fees.
Liquidity providers (LPs) that deposit capital in degen pools must be aware of the following risk factors:
Impermanent loss: Degen pools can expose LPs to a much higher impermanent loss compared to standard pools. This is because allowing traders to swap at a 1:1 dollar ratio could quickly deplete liquidity of either asset in case of large trading volume.
Oracle risk: Degen pools use external oracle price feeds for the prices of the tokens traded in the pool. An oracle malfunctioning could result in incorrect price feeds which could result in losses to liquidity providers.
Trades that take place using liquidity from a pool are charged a fee. The fee is defined at the creation of the pool, and cannot be modified once the pool is created. The pool fee usually varies from 0.05% to 0.3%.
Users can earn a share of the trading fees by depositing tokens into the pool (also known as "adding liquidity"). When a trade is made, the share of the trading fees a liquidity provider receives is directly proportional to their share of the liquidity in the pool used for that trade. A user who has 1% of the total liquidity will receive 1% of the trading fees designated for liquidity providers.
When a user adds liquidity to a pool, they will receive one or more tokens representing their share of the pool. Shares of Classic, Stable, and Rated pools are represented by LP Tokens (LPT). LPTs are fungible tokens where the quantity held is equal to the amount of shares of the pool (e.g. 1 LPT token = 1 pool share, and 0.25 LPTs = 0.25 pool shares). On the other hand, shares of DCL pools are represented by non-fungible tokens (NFT). When a user adds liquidity to a DCL pool, they will receive one NFT containing the details of their position, including the number of shares it is worth. In other words, a DCL NFT can be worth 1 pool share, or 0.25 pool shares. Users can hold multiple NFTs for the same DCL pool, each of which will represent a position in that pool.
Pool APR is the yield you accrue by adding liquidity to a pool. You earn 80% of the pool fee for all trades on the associated pair (or triple for stablecoin pool) proportional to your share of the pool.
For Classic pools, if there is no account to receive the Referral Fee, it goes to all LPs of that pool as a form of increased LP tokens. For the other types of pools, it goes to the Protocol Fee as a form of increased LP tokens
Fees are added to the pool, accrue in real-time, and can be claimed when you withdraw your Liquidity.
Your share will be accrued in real-time and will be paid in addition to your existing position when you remove liquidity from the pool
There are two locations where users can see their liquidity positions, the Your Liquidity page, and the Portfolio page.
You can see all pools you have liquidity in by going to the Your Liquidity page. You can get to the Your Liquidity page by clicking Earn > Your Liquidity in the main menu of the site.
You can see details like how many shares you have, the USD value of your shares, and the amount of each token your shares are worth. There are also buttons to add more liquidity and remove liquidity from the pool.
The "Your Liquidity" tab of the Portfolio page shows you your current liquidity positions. You can get to the Portfolio page by clicking "Portfolio" on the main menu. Each item has a drop-down icon that, when clicked, will reveal details about the position.
Providing liquidity is not without risk, as you may be exposed to Divergence Loss or Impermanent Loss (IL).
Simply put, impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet. - , Nate Hindman, 2020
