The Leofinance WLEO-ETH Liquidity Pool has uncommonly profitable Liquidity Pools.

Now that the Leobridge is live, it’s a hood time to review the advantages of providing Liquidity on Uniswap, via WLEO-ETH trading pair. This post reviews the concept of the Liquidity Provider and how the Liquidity Provision Rewards for the WLEO-ETH Liquidity Pool are better then the typical liquidity pool.

First, let’s review what a being Liquidity Provider means.

Define Liquidity Pool Provider

The definition of being a Liquidity Provider, one who deposits dollar equivalents of trading pairs into the trading pools in exchange for a portion of the transaction fees paid by traders who trade or swap assets on these decentralized exchanges. Providing Liquidity is profitable and safe, so it is attracting investors from outside of cryptocurrencies usual ranks, and it has resulted in billions of dollars moving into DEFI this year.

Define Dollar Equivalent Pairs

Dollar Equivalent Since the ERC token wrapped Bitcoin represents one Bitcoin and all its value, if Bitcoin is worth 4000 dollars USD and Ethereum is worth 400 dollars USD, then one wrapped Bitcoin, WBTC is worth 4000 dollars USD. Furthermore, in DEFI, since one Bitcoin valued at 4000$ would be worth ten Ethereum worth 400 dollars USD.

Example

In the example above, where for simplicity, I said if Bitcoin was worth $4000.00 and Ethereum was worth $400.00, a Dollar Equivalent Trading Pair would contain One Bitcoin to Ten Ethereum. So if you wanted to provide Liquidity to a Trading Pair on a decentralized trading exchange, you would need to possess both Bitcoin and Ethereum in a ten to one ratio. Fortunately you don’t need a whole Bitcoin or a whole Ethereum, just a ten to one ratio in value.

How Leofinance WLEO-ETH Pair is Different

If you become a Liquidity Provider, the platform pays you a percentage of all the transaction fees for swaps or trades done that day, for the trading pair you provide liquidity for. As long as there’s lots of transactions or large monetary incentives being a Liquidity Provider can be very profitable. But your percentage of the rewards is in proportion to your percentage of the pool. So the larger the pool gets the smaller your rewards are. But in Leofinance’s case the WLEO-ETH pool pays Liquidity Providers an additional stream of income from our daily inflation. So unlike any other Token project I know of, Leofinance incentivizes Liquidity Providers beyond the transaction fees with 15% of the daily inflation. Which is usually paid to posts on the Leofinance Blog Platform. Additionally the stream pays you more rewards, the longer you stay in the pool.

So, most liquidity pools pay you only a percentage of the transaction fees, which goes down as the pool gets bigger. But Leofinance WLEO-ETH pays additional income from the 15% of the tokens reward pool and the longer you stay in the pool, the more rewards you get. This differs from the usual liquidity pool rewards which go down the longer your in the pool, so liquidity pool providers get into a pool early and then withdrawal their money after a short period of time. Instead liquidity providers in the WLEO-ETH pool get rewards from a second source, which rewards them for staying in the pool and the rewards go up, the longer they stay. This provides stability to the pool and the token price, by reducing selling pressure. When liquidity providers withdrawal their money from pools because rewards based on transaction fees are going down, they sell their tokens to buy the tokens they need for the next liquidity pool they will invest in, and this creates selling pressure which frequently lowers the token price. This is the opposite of what happens when a liquidity pool is new and people buy tokens so they can invest in the pool. They create buying pressure which usually raised the token price. So Leofinance added this incentive to their pool which adds a method of profit and incentivizes price stability.

So the Leofinance Liquidity Pool WLEO-ETH not only provides rewards by the same method as all other pairs on Uniswap, it provides a second reward source to increase rewards to Liquidity Providers and it provides those rewards in greater amounts the longer you stay in the pool, which is the opposite of what you see in every other liquidity pool because as the pools grow the rewards from transaction fees go down. So your rewards are greater then regular pools and last longer then other pools. Once again, this is the only pool I know of that does this, so it is unique.

Liquidity Provider Rewards can be in WLEO or ETH

An additional special feature, which @khaleelzaki added is that you have the option of receiving your Leofinance Rewards in Ethereum, if your entrance to the Leofinance Community was through the Metamask new account signup process. This was an option created by @khaleelzaki the leader of Leofinance, to bring investors and authors from other blockchains into our ecosystem.