Understanding Liquidity Stake Earnings and LPT's
Let me guess. You thought it would be a GREAT idea to just throw your money into a liquidity pool on Alcor without doing your proper due diligence. "It will be fine" you said. "I just wanted to see what would happen" you told yourself. Now you're more confused than you were when you decided to experiment with the same sex at your friends birthday party sleepover. Well I'm glad your hindsight is still functional you cross-eyed nitwit. Come on then, lets clean up your mess.
Disclaimers - this is NOT FINANCIAL ADVICE - The contents in this article are for entertainment purposes only
You might need a basic understanding of what a liquidity pool is and how it works to comprehend some of the things covered here.
Tips help justify the time spent doing research when I could have been spending quality time with my wife and her boyfriend
WAX wallet - a1gbq.wam
- Understanding LPT's
- Reading Earnings
- Understanding Earnings Behavior
- Withdrawing Your Liquidity - Breakdown
LPT = Liquidity Provider Token. Before You understand why your earnings behave the way they do, you need to understand the nature of LPT's. (No, you can't smoke them, snort them, or eject them you degenerate.)
We are going to use the WAX/Aether pool for this example but this information can be used with any shitcoin pairing. In order for the system to track of your total contribution to the liquidity pool, it cannot use real time Value of your WAX and Aether because their value is always changing. One day it will be 1 WAX = 1200 Aether and the next it could be 1 WAX = 800 Aether. Instead, you will receive LPT's based Wax/Aether value to each other the moment you stake into the pool. (<-- REMEMBER THIS. It has everything to do with why your earnings can show as negative)
Another important function of LPT's is they determine your pool share %. All of your LPT's get put into a pool with every one else's (hence the term "liquidity pool") and the total % of your own LPT's in that pool is your % ownership of that pool. If you are ever wandering why your pool share % is going up and down, it's because people are adding to and taking away LPT's constantly, therefor the number of LPT's will be a different % in relation to the total size of the pool.
IMPORTANT NOTE FOR LATER - As your earnings increase, your LPT's DO NOT increase. They will stay exactly the same until you either deposit more or withdraw them. Your earnings will not be automatically reinvested back into the pool to compound. Instead, Alcor distributes your earnings into your existing LPT's, technically making them proportionally more valuable based on your earnings. (remember this for when you get to the "Withdrawing Liquidity" section.)
Reading Earnings on Alcor
I know it takes you 30 minutes to tie your shoes in the morning but even THIS shouldn't be hard for you.
First, make sure you are under "Swap" and then "+ liquidity"
If you managed to do that without hurting yourself, you will see a section to the right that looks similar to this.
Blue Box - Your total deposit of WAX and Aether. (or whatever pair it was you staked into)
Orange Box - Your total Earnings to date. don't be confused by "(Fees)". Its not a fee you are paying and its easy to associate that with the negative amount of Aether you see just below. (We will address that soon) By "Fees" it just means that the earnings are your share of the liquidity source fees people pay when making trades.
Green Box - The total % of the liquidity pool that you own.
Pink Box - the " + " is to add more liquidity and the " - " is to take out some or all of what you have put in.
Side Note - It is completely normal for both your Earnings and your Pool Share to fluctuate. These numbers are effected by the trading volume and other people adding to and taking from the liquidity pool.
Understanding Earnings Behavior
Disclaimer - This one might add a tiny wrinkle to that smooth brain of yours.
Finally we can address the questions "Why do my earnings show up as negative?" and "Does a negative number mean I'm losing my fake money?"
Lets approach the second question first. (as if this wasn't confusing enough.)
Are you losing money?
Your total earnings aren't negative. One of the 2 coins might show negative but together they will always be net positive. To figure this out you need to convert 1 coin to the other based on the current transfer rate and add them together. In this case its far easier to transfer Aether into WAX.
If you are in the Swap tabs (red boxes), you will be able to easily find the transfer rate. Here we can see in the purple box that 1 wax = 1255 Aether. This may get a little convoluted so we are going to take this step by step. I may sound like a jaded asshole with no friends (because I am) but I care about conveying this information in a way that's easy to follow. (Because you're dumb)
Look at our earnings in the orange box in the previous image. It shows 25 WAX and -12761 Aether.
We know that WAX to Aether is 1255 to 1
Divide our amount of Aether earnings by the current transfer rate to convert it into WAX.
-12761 divided by 1255 = -10 WAX.
Now that our Aether is converted, we know we have -10 WAX and 25 WAX which = 15 wax. (If you're thick enough to get stuck on why -10 and 25 = 15 then its only a matter of minutes before natural selection claims you)
Remember - If you're curious about how much you have earned in total, just make sure to check the current transfer rate before you convert it over.
Why does my fake imaginary money show negative in the first place?
Because, you dingus, when you staked into the liquidity pool, your stake was based on the value of WAX/Aether. (Or whatever pair you staked in to. It's all just as fake as when you tell yourself "I'll start my diet tomorrow. It would be a shame to let this whole cake go to waste.") Because the whole purpose of the liquidity pool is to "provide liquidity" to the market, it needs to borrow from one side to give to the other.
lets say 1 WAX = 1000 at the time you staked 500 WAX at a 50/50 split into the pool. (250 WAX and 250k Aether). 1000 to 1 would be your perfect "balance point". (Balance point is not real technical term. Its just what I am calling it to give this example.) If the price of WAX increases, relatively speaking Aether will decrease by comparison. Alcor will then take from your Aether and Give it to your WAX but in such a way that your total "value" of 500 wax remains the same PLUS your share of the .3% liquidity source fee.
Based on this Image that I spent all of 24 seconds to create on Microsoft Paint, you can see that if one shitcoin decreases, the other will increase in equal proportion but the overall total remains the same "value" of what you staked in the first place. Your earnings in this case will likely reflect Wax +50 and Aether -50,000 plus your share of the earnings. This is an oversimplification of the numbers but the overall concept remains the same.
Withdrawing Your Earnings - Breakdown
Believe it or not, there is a lot that goes in to withdrawing your liquidity. I'm going to break this thing down into bite sized chunks like a cannibal eating another cannibal. There are some juicy little details that are going to help you sink your teeth into the next section...like a cannibal eating another canni-...nevermind. Lets just do this before you open up your incognito browser again for the 3rd "break" you've had since you started reading this.
Red Boxes - It's how to navigate to "- liquidity". It's getting a little old explaining that one.
Yellow Box - Your total amount of LPT's (Liquidity Provider Tokens)
Orange Box - The total amount of LPT you have selected for withdrawing
Pink Box - The slider you use to select the total % of LPT's you want to withdraw
Blue Box - The amount of each of your 2 shitcoins you are getting back based on the value and quantity of your LPT's.
Green Box - Do I really have to explain that its the "Withdraw" button? I'm sure at least one person will find that helpful. That person probably also needs to be periodically reminded to breathe. BREATHE YOU SAVAGE, BREATHE!!!
One very important detail that needs to be pointed out here. You are not withdrawing just "Wax and Aether". You are withdrawing your LPT's that hold your value of Wax and Aether. This distinction needs to be made. Remember back at the "Understanding LPT's" section I told you to remember something for when you arrived to the "Withdrawing Liquidity" section? Your LPT's technically increase in value with your earnings but they do not increase in quantity. To spell it out for people that skipped this whole article to look for this one sentence -
THERE IS NO WAY TO WITHDRAW 'JUST' YOUR EARNINGS.
- Your earnings are divided equally between all of your LPT's. The only way to withdraw 100% of your earnings is to withdraw 100% of your LPT's
"Ok but what if I have 100 WAX and 20,000 Aether in earnings. Can't I withdraw that amounts worth of LPT's and technically have my earnings?"
Yes 'technically' you can, you douche canoe. But remember, your pool share % depends on the number of LPT's you have. Since you are withdrawing LPT's and not the WAX and Aether itself, you are taking from your total pool share % which diminishes your future earnings.
"If the only way to withdraw all of my earnings is to withdraw 100% of my LPT's then what's stopping me from from just withdrawing 100% so I get my initial deposit back plus my earnings and then re-stake everything for more LPT's than what I started with?"
Look at the big brain on you! Unfortunately it's a lot like your ability to see literally anyone else's perspective than your own: It doesn't work. Alcor Exchange remembers what your earnings were. The moment you re-stake everything back into the earnings pool, the system will automatically redistribute what previously was in your earnings back into the 'earnings' section. The only real answer to increasing your pool share % is by introducing fresh funds into the pool. Ask your wife's boyfriend for his credit card info. He might be willing to throw you a bone also.
I hope you learned something other than of my abysmal Microsoft Paint skills. Until next time, I'm out like a cannib- ...eh, fuck it.
WAX wallet - a1gbq.wam - If you found this information useful.
Now go forth and prosper, Dipshit.