xALGO is a liquid staking version of ALGO that generates yield and accrues value from Algorand Governance rewards. In other words, its value continuously increases compared to the price of ALGO.
Folks Finance recently introduced xALGO on Avalanche, and now we have two pools with very good incentives on the Trader Joe platform.
There are two ways to get xALGO
- By doing a MINT at the beginning of each governance period, from the Algorand blockchain to Avalanche
- Simply by connecting to Folks Finance xAPP or directly on Trader Joe and swapping some asset for xALGO.
Either way, select xALGO and the asset you want to exchange, and make the swap.
Once you have xALGO in your wallet, go to the Pools section of Trader Joe and look for xALGO.
Make sure to select a v2 pool, meaning one that says REWARDS to its right, i.e., the first two, xALGO/sAVAX or xALGO/AVAX.
xALGO/sAVAX pool has 1929 QI and 214.28 xALGO as rewards per day while the AVAX pool only 214.28 xALGO, making it 3000 xALGO to be distributed on each pool every two weeks across the leaderboard.
Trader Joe v2 pools belong to the clAMM type: Concentrated Liquidity Automated Market Maker.
Basically, you can add liquidity in a pool within a specific price range. Your liquidity will be organized into "bins," each representing a different price, and you will earn fees when an exchange occurs in a "bin" where you have liquidity.
There are several strategies for this, but basically, you don't want to be out of position, meaning the price surpasses or falls below your last "bin". If this happens you will stop earning fees.
To solve at out of position, you should either add more liquidity, remove everything and add it again, or wait for the price to return to a bin where you have liquidity.
The advantage of staying in position is that you can earn substantial rewards by optimizing your liquidity, especially when the rest of the liquidity providers are out of position.
Why would you want to generate more fees?
To climb on the leaderboard and earn more rewards provided by Folks Finance.
Here's an example of the current ranking for the xALGO/sAVAX pool and the rewards that will be distributed once the period ends.
Looks good, right?
Going back to adding liquidity, you basically have three different ways: SPOT, where you evenly distribute your liquidity across your specified number of "bins"; CURVE, where you focus on the intermediate "bins" and distribute it decreasingly towards the ends; and BID-ASK, the inverse of CURVE.
If the price of the assets fluctuates a lot, to start, I recommend the SPOT method, distributing it across, let's say, 15 or 20 bins so you don't quickly go out of position. Notice that the more liquidity you have on the trading bin, the more fees you'll collect.
You should read more about the different liquidity shapes here.
You can add any amount of each asset, but to begin with I recommend doing it evenly between both.
Once your liquidity is added, you can check your form, the active bin your current deposit, the generated fees, and the fees generated per bin.
And, of course, you can see your position in the ranking based on the fees you generated during the period.
Once a period has ended, your rewards will have a week vesting period before you can claim them.
And that's it.
Although it may seem overwhelming at first, providing liquidity with $xALGO both with $AVAX or $sAVAX with the current rewards offered by Folks Finance on Trader Joe is really worth it.
