Chasing rewards on Quickswap, an intro to farming liquidity pool rewards

By Chris Chen | Ethereum explained | 7 May 2021


For those of you who haven’t tried it out yet, Polygon (MATIC) is a Layer 2 solution on top of Etherum network with much lower fees.

Quickswap, the main DEX on this network (and Uniswap clone) has been incentivizing specific liquidity pools by guaranteeing QUICK (their governance token, analogous to UNI the gov token for Uniswap which is now a top 10 token).

How to get QUICK

Quickswap will allow you to swap for QUICK, however, they also reward QUICK for joining specific liquidity pools. https://quickswap.exchange/#/quick

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The first pool (dragon’s lair) is to stake your QUICK tokens to allow you to get a % of the total fees on Quickswap. These fees will be paid out in QUICK tokens.

When you contribute QUICK to this pool, you get dQUICK but you can’t actually do anything with it. You just hold onto it and the value of dQUICK will go up as more fees are paid on Quickswap so eventually when you convert from dQUICK back to QUICK, you would get more QUICK tokens than you started with. (dQUICK is a deflationary token)

Since the amount transacted on Quickwap isn’t constant everyday, there is no set % rate of return. You can look at transaction volume history on the analytics page and has recently been ~$180M/day

ETH-MATIC and MATIC-QUICK are two pools that are being incentivized right now. Going to 'Pool' and adding ETH and MATIC together will give you a token that you can then stake to get some of the 80 QUICK / day that’s being rewarded

Choosing a pool

You might think, just swap for tokens and choose the pool with the most rewards right? This won’t get you the maximum rewards because the amount of rewards you get depends on what % of the staked pool you are. So even though 80 QUICK is being given away in the ETH-MATIC pool, it’s currently being split over a pool of $45M. You can use this as a ratio of how many QUICK (per day) per $1M.

For ETH-MATIC it would be 80/45 = 1.778

While MATIC-QUICK would be 75/18 = 4.167

This means that if you put the same amount of money in, you’d be getting more QUICK in the MATIC-QUICK pool than the ETH-MATIC pool even though the ETH pool has a higher reward.

The amount of deposits in the pool can change quite a bit day to day so it’s a good idea to keep an eye out and move to different pools if necessary. Thankfully the fees are low on Polygon.

As an aside, a more accurate calculation if you’re thinking of adding money in is:

A = $ deposit you plan on adding (into pool)

B = $ currently in pool (total deposits)

R = Pool rate (in QUICK/day)

Your share of QUICK/day = R / (A + B) * A

What are the risks?

As with any liquidity pooling, you run the risk of impermanent loss (more detailed explanation) if the pairs price diverges.

Instead of getting your rewards in pool tokens, you instead get your rewards in QUICK. This is good if you are bullish on QUICK, however if there is a lot of people trading the tokens you’re providing liquidity for, you could potentially be getting more in fees by not staking than staking (not common). If you want to check this, you’d have to go to the token pairs page and see what the fees vs liquidity is.

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For example, for USDC-WETH

The fees from past 24h are $14k and that’s split between $46M, this is the same calculation as above with QUICK being distributed between a pool, however, the fees everyday are not stable while QUICk given out is the same every day (for as long as the incentive runs).

The last consideration I can think of is when you participate in a pool, you automatically compound. So in the previous example if you did not stake your pair token you’d constantly be getting more USDC and WETH. However, with pair token staking, you get paid out in QUICK at set intervals and you would need go to in and collect your QUICK to reinvest.

Finding the right pair

Finding the right pair of tokens is tricky

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In this example, the ratio for TEL-QUICK is much better than the ratio for DAI-USDC given that they have the same rewards (20 QUICK / day). This is because DAI and USDC are both stablecoins so there should be minimal impermanent loss, while TEL is a coin that’s gone up 400%+ in the past 7 days

Finding the balance of the risks you want to take and the rewards you’re trying to farm will be key to farming liquidity pool incentives

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Chris Chen
Chris Chen

Writing guides as I learn more about crypto


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