The Diesel Pools on Hive became even better
For the ones who still don't know it, we have pretty cool liquidity pools on the second layer of Hive (hive-engine) that are called diesel pools. These diesel pools allow to swap your tokens quickly and to earn rewards if you provide liquidity to them.
Yesterday, there was a major addition to these pools. In order to incentivise liquidity provider more, according to the post by @aggroed, a new fee has been implemented when you swap tokens.
How is it positive to have a fee for swaps?
So far it was possible to earn rewards for providing liquidity thanks to reward pools. The problem with these reward pools is that what is inside of these pools had to come from the creator of the diesel pool. In some situations this worked but the creator has a lot of fees and it's not always clearly visible what his advantages are. There are also some DAO's linked to these diesel pools but unfortunately it's not really clear how all this works. In a nutshell there wasn't that much liquidity provided to these diesel pools and they aren't that popular yet. Most of Hive users, use the normal exchange when they want to swap tokens.
Each time there is a swap in a liquidity pool, the 0.25% fee taken in both paird tokens is transfered to the liquidity providers. Let's say you own 10% of the liquidity in a pool. This means that your position will be increased by 0.025% of the transaction amount that was made. This means that the money that you put in a pool with increase with every swap made. At the same time, the overall liquidity in the pool increases with every transaction.
Several income sources for providing liquidity
With this change it has become much more interesting for providing liqudity in diesel pools. Your tokens will actually grow within the pool thanks to the fees and in addition to that you still get the rewards if the pool is linked to a reward pool. The fees are compounding your liquidity and the rewards are paid every day.
Will the fees prevent people from swapping?
When I look at most of the markets on hive-engine, the spread between buy and sell prices is most of the time much higher than 0.25%. This means that even with the fee, it's most of the time cheaper to use the diesel pools. We also have the possibility to check the price on both the market and the diesel pool to see where we get the best price.
Are you using the diesel pools on tribaldex? Are you providing liquidity?
Let's connect ! You can find me on these platforms:
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How do I invest in the pools?
You go to tribaldex, pools and add liquidity
Ok thanks
Interesting, but could lead to a situation that the pools get larger but yet the liquidity gets even lower (due to the fees). The 0% transaction fees are here more curse than blessing, because people are spoiled and will compare where the rates are better (at least I would).
I agree people don't realize how great everything is on hive. When you start playing with LP on BSC or even ETH, then you quickly realize how amazing hive is in this respect. I'm looking forward to seeing what effect these changes will have.
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This is a great change in my opinion - more incentives to add liquidity is awesome for the chain!
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I think it's a nice change and hopefully some more money will go into the liqudity pools so that this platform can play a more important role. Thanks for stopping by!
I have been using a few of the Oneup and Pizza pools. I am mixed on how successful they are. I think I took a big negative hit when hive jumped to 3.00 and the pools were stripped of Swap.hive. One of the risk of diesel pools(impermanent loss). Otherwise I have been happy to park funds where I don't see them daily and risk spending them on Splinterlands cards.
I like to park second layer tokens in these pools. It's a nice alternative to staking and curating. I believe it's really positive that liquidity providers get an additional incentive to put their coins into the pools. As you said there is a risk involved and it should be compensated in a way.
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Wow... I have heard about this vaguely in some post, so it will be fun exploring it.
Was very bored today, so let me have this in mind to check when I get bored another day!!
It's always good to have some stuff to learn when we are bored :-). Thanks for stopping by!
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I am a little mixed about this because the no fee aspect was something that made the diesel pools different from other AMM pools. Either way, it might make more sense for me to put a bit more into the pool to collect rewards and I will have to pay attention before swapping now.
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I understand what you mean. The free swapping was great but on the other hand the slippage was pretty intense often because the incentive was missing for providing liquidity. I think this solution could be better.
At least one benefit is clear: going forward EVERY diesel pool is incentivized, unlike before. If it doesn't have a rewards pool and it's not incentivized by Beeswap's BXT, at least LPs will have their positions grow from swap fees.
Exactly, so far there was absolutely no advantage in putting funds in some of these pools.
I'm going to try one of these pools out and add some Liquidity and pick up some fees :)
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It's worth to try them out I believe :-)
That is a fantastic update Achim, and as you said for most tokens the spread is much bigger than these fee's, thanks a lot for sharing and stay awesome.
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Thanks for the curation Erik!
Amazing.
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Thanks for stopping by!