It's exciting times to see HIVE and LEO on a different blockchain in the form of wHIVE & wLEO. Yeah, I know it's an old news but I only got time to read Leo Finance's post on Wrapped LEO today 😀
DeFi buzz has resulted in many tokens flowing into Ethereum Network. I heard that even ONT and ONG are now listed on Uniswap. These tokens were already listed on almost all CEXes worth their salt. But yet they needed to be on Uniswap.
However LEO isn't listed anywhere except Hive Engine. And it hopes to get a lot of exposure and trade volume through a listing on Uniswap, to pave way for its listing to CEXes. That's really a good approach. Uniswap can become a proof of concept for other Exchanges to get an idea of its liquidity and volume.
In this pursuit, Leo Finance has set a goal of maintaining $100K liquidity in Uniswap. To achieve this, it has outlined a simple principle:
more liquidity = more users = more attention = more listings
In the times of yield farming, it's also important to incentivize the initial liquidity providers to supply liquidity to wLEO pools. So Leo Finance has also taken care of it by allocating 10% of its 3M bounties fund.
It has proposed to airdrop 300,000 LEO / wLEO to LPs for the first 12 weeks.
So far, everything looks to be well planned. But I was just wondering if 12 weeks yield period will be sufficient to create all the hype aroud this token to sustain the liquidity after that?
300,000 LEO in 3 months comes to 100,000 LEO per month. If we get to $100,000 liquidity level, it will be like 1 LEO airdropped for each dollar of liquidity provided per month. Even if we take the recent high of LEO @10 cents, the monthly yield would be 10% i.e. 120% APY. And if liquidity gets to $200,000, APY will come down to only 60%. But on top of it, investors will also get 0.3% trading fee.
A consistent 60% APY is good enough to attract large investments into the pool. But seeing the recent trends and returns in yield farming, even 120% APY doesn't seem enough to me. 😜
And if it's only for 12 weeks, it's a trouble to power down for 4 weeks to convert to wLEO and pay Gas to move to Uniswap and back and power up. Or should I expect high trade volume after 3 months to get a better compensation from trading fee alone to continue providing my liquidity?
Honestly, I don't foresee a high trading activity. Presently, 90% of LEO is staked implying that people like to keep it staked to earn curation rewards. Trading activity increases in a volatile or speculative market. But 90% staked coins provide LEO prices a good stabiloity. So I feel, I'll have to move back my liquidity after the airdrop period is over.
So would this 90 day show be enough to get all the attention to get a listing at some big centralized Exchanges? I really doubt. May be, I'm sounding too pessimistic here. But what do you feel?
If you're planning to provide liquidity to the wLEO pool, do you plan to keep it after 90 day period is over?
Okay, what if this airdrop scheme is modeled differently?
If you provide a liquidity of 1000 LEO for a period of 1 year and in return Leo Finance delegate you 1000 LEO for a year, would you feel inclined to provide liquidity for a year? I mean what's the loss? You only need to supply ETH component and incur some gas and you get equivalent stake on Hive chain too. Neither LEO Finance lose anything nor you as yield incentive is provided through inflation pool. So bounties fund will remain intact after one year.
At the rate of 10 cent per LEO, $50,000 LEO will mean 500,000 LEO delegation. (The other $50,000 will be ETH supplied by the LP). I think, this much power up & delegation can be managed by the bounties fund.
This will assure a 1 year liquidity without spending anything from bounty fund.
This solve another issue of Trust. To trust a liquidity pool of an "unrecognised" token, liquidity needs to be locked at least for a year. UniCrypt provides a good interface to lock promoter's liquidity. The higher the lock in period, better is the Trust Score for that project in UniCrypt Browser.
So every Liquidity Provider willing to get the "airdropped" delegation would need to provide Proof Of Liquidity by locking their UNI-LP tokens at least for 6 months or a year on platforms like UniCrypt and then can request / avail the delegation.
If there is higher liquidity, there will be low slippage. Thus LPs don't lose on slippage.
It would be good if Leo Finance can also initiate a wLEO-wHIVE pool. Since LEO is listed only on Hive Engine, a wHIVE-wLEO pair will help in calibrating market price of wLEO in wLEO-ETH pair. Otherwise, arbtraging will become a daunting task.
In turn, this will also give some push to wHIVE pools on Uniswap.
In addition to all these, Leo Finance team should also make a provision for a little more tokens for giveaways. Along with the launch on Uniswap, Leo Finance team need to promote the project through various AMAs in different Telegram chats, Twitter, Discords etc. Some promotional budget to cover themselves by YouTubers, etc. is also needed. But I hope it's all planned too. We'll see.
Are you going to supply some liquidity to wLEO pools on Uniswap, Balancer etc.? How much return do you expect from trading fee alone after 3 months?
I'll like to provide some in the airdrop phase but I'm not yet decided for how much amount I should put in there. How about you?