This has been something I have wondered a lot about over the last few weeks. Does providing Liquidity in a pool for a token pair give you anything in return and if so what does it give you really?
I know staking ETH gives a "guaranteed" return on investment right. There is a APR that you get for staking. But Liquidity pools are a little different. You lock up 2 tokens and that enables other people to swap Token 1 for Token 2 and that in theory gives you access to a little of the fees for each swap. On the surface I think we all understand that part. On paper it looks simple and clean.
But I wanted to dive deeper and actually see if it was worth it or not.
So I did a little experiment on Alcor. I had a few coins staked in Liquidity pools already so I took a snapshot on December 8th of 2 pools and than took another snapshot on December 15th. They were exactly 7 days apart (minus 20 minutes).
The 1st pool I had some coins staked in was the WAX/SHING pool.
Staked:
33.09569532 WAX
139,874.3772 SHING (worth 15.12872686 WAX at time of writing)
total staked value was 48.22442218 WAX ($3.26 on Dec 8th)
Unclaimed Fees:
0.39213618 WAX
3,294.4490 SHING
After 7 days here are the numbers:
Staked:
26.08065587 WAX
197,622.2033 SHING (worth 21.35808040 WAX)
total staked value was 47.43873627 WAX (Worth $3.47 on Dec 15th)
Unclaimed Fees:
0.67098698 WAX
6,161.6479 SHING
Then we need to find the difference of the fees from start to finish which was
0.2788508 WAX
2,867.1988 SHING (worth 0.31073770 WAX)
Total Fees earned over a week was 0.5895885 WAX
Now we add the total staked amount after a week + the difference in fees and it comes out to:
48.02832477 WAX ($3.50 on Dec 15th)
Which is less than the valuation I started with of 48.22442218 WAX.
So over a week I lost 0.19609741 WAX. That isn't so good folks. But because the price of WAX increased I actually gained $0.18 worth of WAX.
The 2nd pool I had some coins staked in was the DHC/WAX pool.
This one is a little harder because the price of DHC was changed a lot over the week so we are going to look at prices just at end of the week.
Starting Amount:
And here is what I had on December 15th:
The first thing that sticks out is how much more WAX I had and how much less DHC I had. That to me shows that a LOT of WAX was traded for DHC over the week. And that is all thanks to Byron creating cool drops that can only be bought with DHC (his coin).
I am not going to break down cost like i did for SHING/WAX because of the massive price change. But what I will do is just point of the $ difference.
When I started I had $4.15 worth of crypto staked. When I ended I had $7 worth of crypto staked. And that is solely because so many people swapped WAX for DHC that my amount of WAX went up from 24 to 78 which is nuts.
The difference in fees was minimal 0.79380974 WAX.
Something else to note too is that on Dec 8th I had 17.10% of the pool share and on Dec 15th I was down to 5.97%. So a lot more people started to add to the pool as well. (Which I think a lot of it was Byron himself if I had to guess).
All of this to say that staking a small amount in a very large pool is not really worth it in my opinion. However staking in an up and coming pool is highly worth it if you are looking to just increase your WAX portfolio. As you can see I in essence made $3 worth of WAX over 1 week from the DHC/WAX pool alone.
Now I have to admit that the price of WAX over that time period went from $0.06889 to $0.07288 so that had something to do with the price increase but not all of it.
I think I am going to keep this going and see how it plays out. Without adding anymore coins into the pools I am curious to see where they are in a weeks time again.
