This time last week, we put out a post announcing the establishment of the LBI/LEO liquidity pool. It has been quite exciting for me to see it steadily grow, with liquidity being added to it each day since. As it stands at the time of this post, the pool has attracted just a touch under 3200 LBI tokens and almost 11200 LEO. That's around $667 USD worth of liquidity added in just a week.
If you want to look back at the launch post from last week, here it is:
@lbi-token/leolbi-liquidity-pool-dm
I just want to highlight one comment that came in on that post, from LEO founder @khaleelkazi
@khaleelkazi/re-lbi-token-2juizjmk6
I didn't really make a big deal of it at the time, but just think of what it could do for our little LBI project to be positioned on LEODEX. A direct path into LBI from all the major crypto's linked to LEODEX would be quite an exciting prospect. But before we get ahead of ourselves, there is a lot more work to do to get there.
How the pool works.
If you are new to liquidity pools, some research is required to understand the mechanics of how they work. In simple terms, liquidity providers put two assets in to pool, with matching values, in order to earn from swap fees and possibly other incentives. When someone wants to use the pool to make a swap, they basically put one token in the pool, and take out the other one, for a small fee which stays in the pool for the liquidity providers.
For this particular pool, liquidity providers add LBI tokens with an equivalent amount of LEO, based on the current prices in the pool. currently the ratio is 1 LBI = 3.497 LEO which is very close to the current asset backed value for LBI of 3.426 LEO. I feel it is quite healthy that the price is close to the asset backed value at this stage of our re-launch.
How much do we need in the pool?
This is a hard thing to quantify really. I'd personally like to see, over time, the majority of LBI tokens paired up with LEO in the pool. The total asset value of the LBI project is around 675000 LEO. So if all the LBI were in, this is how much matching LEO would be needed. This is pretty unrealistic, as many LBI holders may not have the matching LEO to participate. Others appear to be inactive on HIVE these days, and may even have forgotten about their LBI's, or lost keys, or whatever.
Having a deep pool is important to provide an easy entry for new investors. The order book market on Hive engine has its limits. Currently it is difficult to buy LBI's at a reasonable price - there isn't much on offer. Just a few months ago, it was hard to sell them at a good price, and the fund was buying them back off the market to give investors the opportunity to exit. Having a strong LP removes the need to offer a buyback scheme. The possibility is there for people to sell LBI easily if needed.
The yield is small.
At the moment, the APR on the pool is very small. The first incentives just got added a couple of days ago, and the yield has dropped below 1%. It will be hard to attract a deep pool of liquidity with such a small yield. However, the first distribution contract has been set for 90 days. Each week more funds will get added to the contract.
I am thinking about ways to boost the yield, and make the pool more attractive. The good thing about this pool is that adding to it will not disadvantage LBI investors by missing out on dividends. Tokens that people put in the pool still count for the weekly dividend, once it resumes hopefully at the end of the week. So that means their is no opportunity cost from adding to the pool. The other plus is that the rewards are not inflationary. We are not minting new LBI tokens, or expanding the supply in any way to fund incentives. A portion of weekly income is used.
MAYBE, we need to increase that portion. Currently 5% of the weekly income that LBI generates goes to pool incentives. It is possible that we need to increase this to 10 or even 15% to have the funds to support a deep pool. I'll likely put out a post later in the week, or next week to discuss this option in more detail, but I thought I'd just float the possibility today to get people thinking.
There is another possibility to make the pool more interesting. We could add some of the tribe tokens we earn from content into the reward contract. I have started to add tags to earn BBHO and ARCHON on our posts. I'm not really up to date with other tribes we could add tags for, so any suggestions you can give me would be appreciated.
One little thing I was looking to see happen, has happened much faster than I expected. LBI has become the number 2 ranked pool by liquidity for LEO paired pools. I honestly thought it might take months to get there, but it has only taken a week. Obviously, the volume amounts are small, this pool just started and the others have been around for a while. But the first week for liquidity has far exceeded my expectations.
I want to take a moment to thank everyone that has added to the pool so far. I'm looking for ways to make is more attractive, but for now I am grateful to everyone that has started adding to it. I really feel that the pool will have significant benefits in time for both current LBI holders, and new investors alike.
Watch this space for further updates, and if you have any suggestions for ways to boost the returns, and make the pool more attractive, I'm all ears.
Thanks for taking the time to read this post, if you would like to learn more about LBI, here are some more of our recent posts to look into:
@lbi-token/lbi-weekly-holdings-and-income-report-week-3-19-aug-2024-7vv
@lbi-token/dare-i-say-the-word-flywheel-lhw
Have a great day,
JK
@jk6276
I'll sign off with an GIF showing LBI holders just chillin in the pool:
