[Finished] Supply liquidity for Incognito DEX. Provide privacy for the world.

I am not clear on how a spread sheet could accurately predict results when the amount of PRV and Staked coin fluctuate with market use. I have staked the pair PRV/PBTC and have seen the amount of PRV go up/ pBTC down and vice versa occur constantly. Not sure how spread sheet could handle it. It was my understanding that the liquidity provided made his profit thru this fluctuation. The posted % returns are more of a smoothed average of this action?

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The spreadsheet can not predict actual results. It only gives a basic understanding how to calculate potential rewards. As you mentioned, of course it’s fluctuates and spreadsheet can’t estimate such fluctuation. Rewards calculated on average of fluctuations.

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@J053, Corey Clark is right: we can earn a higher APY in the stake pool; however, consider that liquidity is partially what helps maintain the value of PRV when we make large trades.

I remember when USDT liquidity was somewhere around 10k and PRV was around .50 USDT. You could hardly trade more than 100 PRV before the conversion rate started to fall dramatically from .50 to .35 per PRV, say. These aren’t exact numbers, but they demonstrate the pitfall of low liquidity. Now, however, the USDT liquidity is close to $541k, and we can trade up to 10,000 PRV with minimal slippage.

Without liquidity, the PRV we earn in stake is worth nothing. It’s true we could all earn a higher APY if we pulled liquidity and invested in stake, but we would be earning a percentage on a coin that has little monetary trading value.

It’s a balancing act. We want to earn as much as we can, yet we need to maintain the value of what we earn. Highest APY is not the only, or even the most important, consideration.

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Fantastic point, wholly agree.

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@Gold So what potential solutions would there be to provide more benefits to liquidity holders? Is there anything we can think of to develop a better option for evening this out?

Would a reward based system be possible to provide for liquidity holders?

Instead of limiting liquidity providers to the current system, what if there was a tiered bonus system for liquidity providers?

For example, a btc liquidity provider that included 5 btc and prv is tier one and receives x bonus. 2 btc tier 2 smaller bonus etc.

Each liquidity provider has to hold leave the liquidity for a number of days to receiver the bonus.

It would be similar to incentives banks offer for savings account on top of an interest rate. I.e. put 50k in this savings account get 1.5% plus $300 bonus for holding a min balance of 50k for 90 days.

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@Joe_Moffett, that’s an excellent question. I don’t have a solid answer, as I am still learning tokenomics, but I can at least provide more detail on my perspective.

On one hand, I think the incentives for providing liquidity are currently strong. A 62.7% return is not something you can easily get elsewhere. An 8% return on stablecoins isn’t bad either, and fairly typical for earn products, like on Nexo.io. You can find higher returns on stablecoins, up to 12% in the case of Crypto.com, but nothing like the 62.7% we can earn on PRV. If I stop and think about it, the incentives for liquidity providers are already outstanding, and I honestly don’t know how much richer the company can make the rewards without undermining its own financial stability.

Now, compared to liquidity rewards, the incentives in the staking pool–and even more so in the vnodes–are definitely stronger (as long as there is ample liquidity for trades). Validators, rather than liquidity providers, definitely get the best incentives on this platform. So it seems like a no-brainer to be solely a validator to take advantage of the higher returns.

However, I see value in being both a validator and a liquidity provider. This way, you reap the best of both options. You get insanely high returns, and you help prevent slippage in large trades. Being both, I think, is the way forward. The two options work together to create an incredible benefit. And the incentive is, you have a direct hand in securing your own investment.

Just to illustrate, think of the following scenario: a platform made mostly of validators, and a few whale-sized liquidity providers. Suddenly, a whole pod of the whales decides to divest from Incognito, effectively emptying out the liquidity pool. Suddenly, all the coin the validators have been hodling drops dramatically in value because liquidity is so low you can’t trade more than 1,000 PRV at a time without significantly diminishing your return. Validators feel cheated and trapped.

Now, consider the alternative: instead of relying on a few whales to provide liquidity, a huge portion of the community adds liquidity to the pool. Not only does this help prevent slippage, it also makes the pool more “decentralized,” in this case meaning less reliant on just a few liquidity whales. If we all pitch in, not only do we get an amazing kickback, but we also get to ensure that our investment maintains its value–even if a whale decides to swim back out to sea.

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All valid, I agree completely, but the fear of whales pulling out (hehe) will persist regardless. It has a potential to effect price at any point, but to your point we can mitigate that by everyone playing a part.

That all being said an incentive makes it a harder decision for a whale to pull out, so Idk maybe an option. :man_shrugging:

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Hey @Gold exactly right points here. The community should stop thinking about to get highest possible APY, because it is the way to nowhere.

Imagine if everyone just earn highest APY and do not provide liquidity at all. What would happen ? Answer is clear, we will have a bunch of holders without opportunity to trade.

I think every PRV holder should rethink his/her vision and split tokens between staking and liquidity. We can growth the pools only together.

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Thanks, Andrey!

This is a very good point, and I think that is what @andrey and team have created with the 62.7% return on liquidity program. Around the start of the incentive, the liquidity pool shot up from tens of thousands to hundreds of thousands of dollars. We don’t know who contributed what, but personally, I think if I had $50k invested at 62.7% and roughly another $50k at 8%, I’d be fairly content. There is no other market I can think of with that type of aggregated return.

Still, since I’m not a whale, and I don’t know who contributed what, or what their investment plans are, I still like the reassurance of contributing to both validation and liquidity pools. For me, it’s the way forward, but I definitely understand wanting to get the most out of every dollar. I totally get that.

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Thanks @andrey and @Gold ! Honestly, I haven’t thought about APY because I don’t have enough money to do anything more than stake a node. And when I first joined I didn’t really understand what you both just explained.

I think the goal of incognito is what’s important a private crypto network, so I agree, I’ll have to add some liquidity when I can!

For me, it’s the way forward, but I definitely understand wanting to get the most out of every dollar. I totally get that.

And this line says it all, economic self interest is inevitable, but as you also pointed out the 62.7% accounts for that, but I would say it’s fair to keep top of mind. Maybe even just pointing noobs like me in the direction of liquidity would help. I was hung up on the node because this stuff is all fascinating haha

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True enough.
It is very hard to think of anything better, the only thought that popped in my head is that the split is what caused the biggest “issue” (it’s not really an issue), but a thought I had was to make the split similar to the split I get as a “pnoder”. Put of 65% PRV and 35% of whatever other coin/token you want?

Also, starting a liquidity pool is something that kinda saddens me. I wanted to immediately put my XYO straight into incognito to swap for PRV. Keep it all private. But there is not a real pool size and I would lose out on basically all of my XYO. I would have to provide like 100,000 XYO to equal 1 PRV. So, for now I have to send it to and exchange, swap for USDT then send to incognito.

Any thoughts on that? :sweat_smile:

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If you mean the rate PRV <> XYO not equal market rates ?

thank it’s quite easy to fix, trade a small piece of XYO to bring rates to normal and then you could add liquidity with a market balance of XYO <> PRV.

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So, I just need to do a handful at a time then and I’ll get a more reasonable return?

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So I did a few tests, the difference between incognito and the KuCoin exchange for a better direct trade was only thousandths of a difference, which can translate to a little loss over time, but the fees on incognito are so low I’ll actually have a better outcome even though I earn a little less now per trade and I pay incognito fees!
Great! This is perfect! And the transactions I do here are all private and help the project! This is my first REAL application of incognito!!!

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So liquidity rewards paid out to pdex as they should, but on the invest page the “ticker” is gone and it has reverted back as if I have no liquidity when I still do?
image

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Hey, @Gold . I just loved those explanations you did, it was so clarifying to me.
Tks a lot.
Suggestion: Why don’t you create a topic to share your toughts about the incognito tokenomics?

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Guys…this week we are testing out an experiment especially for XMR users in the Incognito network. You can find the details here: Earn ~35% APR on XMR by adding liquidity. Please try it out and give us your feedback.

xmr

Here is the details

  1. The interest rate for users adding liquidity on PRV <> pXMR is changed to 10% on XMR (instead of the current 8%)

  2. If you only have XMR, we recommend you a strategy, so that you can earn an estimated 35% APR on your XMR by participating in the pDEX liquidity reward program.

It’s still a recommended strategy and if the community likes it, we might consider implementing the strategy as an automated feature like the ‘private lending’.

If you have any question, please feel free to drop your comments on the thread or DM me at @jason

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@OhDonPiano, I appreciate the kind words, thank you! I am still learning the ins and outs of tokenomics and feel underqualified to provide my thoughts; however, @raz has created a rich discussion about the tokenomics of PRV specifically, with many informed perspectives chiming in. I highly recommend the thread if you have yet to check it out.

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Is there a spot to see your “investment” grow like in the Staking section? I paired some ETH with PRV and would love to see the real time growth. Or is that just a feature of PRV staking?

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Yes. Go to Trade --> Invest and you should see a ticker that displays your real time earnings.

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