Liquidity Mining: Part 1, an overview on getting started.

Jan 12, 2022

Well, firstly, what is Liquidity Mining? "Users can become Liquidity Providers (LP) by providing liquidity to the pool, indirectly becoming a market maker and earning commission dividends from trading fees, which is known as liquidity mining." (Gate.io)

In the case of liquidity mining it is 'dual-asset'. For example, dual assets are paired with USDT or ETH on Gate by example. Finding a liquidity pool is easy, and the easiest way is to pull up the spot page for an altcoin and click on 'Liquidity Mining' on the tab to the right of spot graph. Take a look below.

This will pop up, and as you can see for an example, I have just added to this Liquidity pool (Lp). You can see I have a share of the Lp next to 'Ratio' and the dual asset is POSI and USDT that I have added already. To enter a Lp you need the altcoin thus buy beforehand and of course in this case sufficient USDT to cover as well. So how do you add?

Click the red 'Add' button and this pops up. Enter the' Size' of the altcoin, in this case 50 and the size of USDT is automatically calculated that you need to deposit at a ratio of 50%: 50% USDT or ETH, 50% Altcoin. Click 'Add' in the new pop up box and your in ! (Of note: Gate minimum buy in is $200, that is minimum of $100 for each asset). Eventually you will see under 'My liquidity' your added share to the Lp. Don't panic if you don't see it for a minute or so too, it will appear trust me. Once entered into a Lp on Gate you cannot withdraw for one hour; it is essentially locked but only for a short period of time. Thereafter, any time and instantaneously too. So how do you redeem?

Click the white box red writing button 'Redeem' and this new pop up appears. As you can see 'Redeem Liquidity' has a sliding scale and you can remove all or part of your liquidity as you wish. Once you hit 'Redeem' the assets are sent back to you immediately still as the dual assets you first added as outlined in 'Estimated redeemable'. Then you can sell the altcoin if you wish. Also, and especially in the case of 100% withdrawal, don't forget to collect your rewards too!

Click 'Withdraw' the new pop-up hit 'Withdraw' again and that too is sent immediately back to you. You can withdraw at any time, indeed multiple times. even if you are staying in the Lp too. So that's the basics, but how do you earn? Let's take a further look.

Hover over 'Accumulated bonus pool' and this black box will appear. As you can see, in this case, two rewards are given and with timeframes too. GT, the native token of Gate, is calculated hourly and is the reward given for the coming hour to all liquidity providers in the Lp as to their share. In our case by example 0.41% of the 0.6 Gate for the next hour. POSI, the altcoin in this case, is the total awarded over 2 months but is continuously paid out minute by minute to the providers. Again based on the share of each provider. A handy way to view this using this example is 2,830/60 days gives you a daily rate payout divided further by our share of 0.41% will give you a good estimate of how much POSI you will gain. In this case it would be expected to earn 0.195 POSI a day on top of GT rewards. But also remember here that it is only 'estimation' as when other liquidity providers add or withdraw their liquidity then your percentage also changes too in the Lp. Here's a couple more pictures on Rate of Return (RoR) to give you an historic idea how well the Lp is doing.

Hover over '7-Day Annualized yield' and ROR pops up. Here you have an APR breakdown. You can also hover over 'Today APR' to view the last 24 hours. Click on the 7-day and this pops up as a visual graph.

This gives you a visual representation as to how the Lp has performed.

So, that's about it as a 'getting started' guide. But a few more notes before this is over.

"The new AMM Reward Pool has been enabled on Gate.io. Fixed 0.3% commission fee for both Taker and Maker ... In addition, as rewards for LP, a fixed percentage (such as 50%) of the transaction fee will automatically be bought into GT through the open market and put into the AMM Reward Pool" (Gate.io)

AMM (Automated Market Maker) and by this model the notion is by providing liquidity that helps in providing stability in spot price. In reality though this often doesn't seem to be the case and I believe due to a lack of liquidity providers in a said asset. When you see 'AMM fixed' it will include GT rewards too. Non-AMM is usually 0.2% as opposed to 0.3%.

To follow, why you shouldn't worry about 'impermanent loss' and further strategies on 'Crop-rotation' which is not staying in Lp's for too long and maximizing profits. In general, Liquidity pools are a great way of hodling and are probably best suited to this and CryptoDamsel, here on Crypto Analysts channel, wrote an article with this idea in mind some 2 weeks ago (bbs.market/BANTER/posts/BrnTDYIvMptMIVuXx4Az) and I suggest you use that as food for thought too. Also, Gate has been used by example, but there are many other exchanges doing the same so shop around. Finally, always keep in mind the spot price is god; Your liquidity, thus investment, will go up and down too !

Links for Parts 2 & 3 below:

Please read Part 1 linked at the end of this article first. Arrggghh, that word 'loss' ! Nobody likes to lose but let's have a discussion about 'Impermanent loss' (IL), what it really means, and ultimately why you don't need to worry about it. The argument of just holding the asset in spot as opposed to placing it in a liquidity pool (Lp) thus liquidity mining, and how it relates to your profits or loss on investment. Now viewing the above chart it can be seen that versus just holding spot and thus within an Lp profits and losses are not at the same scale. For example from the above chart, say an altcoin goes up 25% what will be the difference between just holding spot and being in a liquidity pool? Short answer: Less profit as the curve downtrends from entry price at the 0% line. For example: XYZ is $1 and you buy a 1000 of them and hold as spot and you also still have $1000 USDT too (You have $2000). The price goes up 25% thus XYZ are now worth $1,250 and you still have your $1000 USDT (You have $2,250 in total now). In a liquidity pool you add your 1000 XYZ at $1 each and your $1000 USDT, thus you have $2000 dollars in the Lp. The price goes up 25% and your share of the liquidity pool is @$2223.50 (894X$0.25 profit plus original $2000) as indeed it is constantly being 're-balanced'. The 'Impermanent loss' in this case is $26.50 and that is the difference between holding spot versus being in a Lp. In sum, you lost a potential $26.50 in profit but that's only a little over 1% less than holding spot. But pray, why then do Liquidity mining? Simple, the hour by hour rewards. In an Lp you are making your money work all the time and thus as a holder that's great. Indeed, and over time, your rewards can indeed outstrip your impermanent loss and give you an overall greater potential profit. As a guide too, (compliments of Brinktrade) IL as follows: Prices up 50% IL 2%, 75% up 3.8%, 100% up 5.7% and so on. Don't shoot the messenger as to my above example as it is ballpark but I think you can see why you shouldn't worry about IL when you are in a Lp. For further more technical reading on IL (and used as sources) please copy/paste the links below starting with https too.brinktrade.medium.com/why-you-shouldnt-care-about-impermanent-loss docs.alpacafinance.org/alpaca-academy/lesson-5-the-truth-about-impermanent-loss-and-common-misunderstandings So, with the horrible loss out the way, let's talk about making a profit. Yesterday I opened a Lp in POSI paired with USDT with a view to hodl as a small sideline. Let's see what's happened to that over exactly 24 hours from inception: A day in the life of a Lp to use as by example.I started with exactly 50 POSI and added the same in USDT value at the time being $138.36, so total when added $276.78 (Total actual investment $277.16 as remember 0.3% commission to buy POSI spot too, but for purposes of explanation I will exclude this 0.3% charge to keep it simple). Look at the left Lp from yesterday: So within minutes as I made some screenshots I was down 63 cents what happened? The spot price dropped a cent or so but now 0.09 more POSI and less USDT by 26 cents. This is the cause and effect of re-balancing in a Lp. I also figured yesterday that my share of POSI earnings may be 0.195 POSI in 24hrs but I indeed earned 0.200 POSI, why so?Well to answer that question first, my share of the Lp went up from 0.4135% to 0.4271% thus the increase in how many POSI I would gain over 24hrs. This happened as you can guess because more investor's dollars withdrew from the Lp than those added to it. As you can see from the right Lp 'Latest add and unlock' just in those three transactions more was withdrawn than added.Why is my Lp now is much larger than it was before in 'My liquidity' at $280.90? Simply spot price went up from @$2.77 to @$2.85 or @3% up in 24hrs. So, where am I now? $4.12 up in 'My liquidity, some 1.5%. Hang on that's half? No it isn't as your USDT is always a USDT it's 'stable' thus the gain on the altcoin is indeed as near damn it 3% too bar IL as discussed. But here's why you are in the game: Rewards too! 24hrs has gained me $0.9391 too (0.2 POSI and mostly the rest GT). Just in rewards about 0.34% on my initial investment in a single day being APR 124% and close to the 'Today APR' of 131% in the Lp. Yes, you can see the re-balancing effect here again: More USDT by $2.31 but less POSI by 0.616. To conclude, don't worry about impermanent loss and don't even worry about re-balancing. Worry about larges crashes in the spot price and maybe re-evaluate your position but don't worry about minor dips as your rewards hopefully make up for this too. This is why your in the game and hope too that the spot price keeps going north as well, but keep an eye from now and then even if your strategy is to hodl long-term. Here's the link for Part 1:Part 3 on its way: Crop rotation and further Q&A, bear with me lol. Please comment below and feel free to say hello to me on BBS.market/GGGXX DM & AMA.Cheers, CryptoGlyn.

bbs.marketLiquidity Mining: Part 2, Impermanent loss no worries and what your goal is.Please read Part 1 linked at the end of this article first. Arrggghh, that word 'loss' ! Nobody likes to lose but let's have a discussion about 'Impermanent loss' (IL), what it really means, and ultimately why you don't need to worry about it. The argument of just holding the asset in spot as opposed to placing it in a liquidity pool (Lp) thus liquidity mining, and how it relates to your profits or loss on investment. Now viewing the above chart it can be seen that versus just holding spot and thus within an Lp profits and losses are not at the same scale. For example from the above chart, say an altcoin goes up 25% what will be the difference between just holding spot and being in a liquidity pool? Short answer: Less profit as the curve downtrends from entry price at the 0% line. For example: XYZ is $1 and you buy a 1000 of them and hold as spot and you also still have $1000 USDT too (You have $2000). The price goes up 25% thus XYZ are now worth $1,250 and you still have your $1000 USDT (You have $2,250 in total now). In a liquidity pool you add your 1000 XYZ at $1 each and your $1000 USDT, thus you have $2000 dollars in the Lp. The price goes up 25% and your share of the liquidity pool is @$2223.50 (894X$0.25 profit plus original $2000) as indeed it is constantly being 're-balanced'. The 'Impermanent loss' in this case is $26.50 and that is the difference between holding spot versus being in a Lp. In sum, you lost a potential $26.50 in profit but that's only a little over 1% less than holding spot. But pray, why then do Liquidity mining? Simple, the hour by hour rewards. In an Lp you are making your money work all the time and thus as a holder that's great. Indeed, and over time, your rewards can indeed outstrip your impermanent loss and give you an overall greater potential profit. As a guide too, (compliments of Brinktrade) IL as follows: Prices up 50% IL 2%, 75% up 3.8%, 100% up 5.7% and so on. Don't shoot the messenger as to my above example as it is ballpark but I think you can see why you shouldn't worry about IL when you are in a Lp. For further more technical reading on IL (and used as sources) please copy/paste the links below starting with https too.brinktrade.medium.com/why-you-shouldnt-care-about-impermanent-loss docs.alpacafinance.org/alpaca-academy/lesson-5-the-truth-about-impermanent-loss-and-common-misunderstandings So, with the horrible loss out the way, let's talk about making a profit. Yesterday I opened a Lp in POSI paired with USDT with a view to hodl as a small sideline. Let's see what's happened to that over exactly 24 hours from inception: A day in the life of a Lp to use as by example.I started with exactly 50 POSI and added the same in USDT value at the time being $138.36, so total when added $276.78 (Total actual investment $277.16 as remember 0.3% commission to buy POSI spot too, but for purposes of explanation I will exclude this 0.3% charge to keep it simple). Look at the left Lp from yesterday: So within minutes as I made some screenshots I was down 63 cents what happened? The spot price dropped a cent or so but now 0.09 more POSI and less USDT by 26 cents. This is the cause and effect of re-balancing in a Lp. I also figured yesterday that my share of POSI earnings may be 0.195 POSI in 24hrs but I indeed earned 0.200 POSI, why so?Well to answer that question first, my share of the Lp went up from 0.4135% to 0.4271% thus the increase in how many POSI I would gain over 24hrs. This happened as you can guess because more investor's dollars withdrew from the Lp than those added to it. As you can see from the right Lp 'Latest add and unlock' just in those three transactions more was withdrawn than added.Why is my Lp now is much larger than it was before in 'My liquidity' at $280.90? Simply spot price went up from @$2.77 to @$2.85 or @3% up in 24hrs. So, where am I now? $4.12 up in 'My liquidity, some 1.5%. Hang on that's half? No it isn't as your USDT is always a USDT it's 'stable' thus the gain on the altcoin is indeed as near damn it 3% too bar IL as discussed. But here's why you are in the game: Rewards too! 24hrs has gained me $0.9391 too (0.2 POSI and mostly the rest GT). Just in rewards about 0.34% on my initial investment in a single day being APR 124% and close to the 'Today APR' of 131% in the Lp. Yes, you can see the re-balancing effect here again: More USDT by $2.31 but less POSI by 0.616. To conclude, don't worry about impermanent loss and don't even worry about re-balancing. Worry about larges crashes in the spot price and maybe re-evaluate your position but don't worry about minor dips as your rewards hopefully make up for this too. This is why your in the game and hope too that the spot price keeps going north as well, but keep an eye from now and then even if your strategy is to hodl long-term. Here's the link for Part 1:Part 3 on its way: Crop rotation and further Q&A, bear with me lol. Please comment below and feel free to say hello to me on BBS.market/GGGXX DM & AMA.Cheers, CryptoGlyn.

(Please read parts 1 & 2 also, links at the bottom of this page for the complete guide.)Firstly, what is Crop Rotation? In utilising liquidity pools (Lp) the idea is to maximise profits by staying in said Lp for a short period of time, that is, rotating your capital from one Lp to another given various conditions, and as opposed to holding a position long-term in a single Lp which is generally the favoured ideology for Lp's.In general, Crop Rotation (CR) can be a high risk strategy with obviously higher returns, but from my experience if you remain on the ball and follow carefully it does indeed pay off. However, unlike a hodl position you have to check in frequently to understand and make sure when to get in and more importantly when to get out of a Lp by using CR.<u class=

bbs.marketLiquidity Mining: Part 3, Crop rotation and further Q&A's.(Please read parts 1 & 2 also, links at the bottom of this page for the complete guide.)Firstly, what is Crop Rotation? In utilising liquidity pools (Lp) the idea is to maximise profits by staying in said Lp for a short period of time, that is, rotating your capital from one Lp to another given various conditions, and as opposed to holding a position long-term in a single Lp which is generally the favoured ideology for Lp's.In general, Crop Rotation (CR) can be a high risk strategy with obviously higher returns, but from my experience if you remain on the ball and follow carefully it does indeed pay off. However, unlike a hodl position you have to check in frequently to understand and make sure when to get in and more importantly when to get out of a Lp by using CR.<u class=

TY CryptoGlyn and feel free to comment below and say hello if you want over on BBS.market/GGGXX , DM & AMA.