Sovryn is a decentralized protocol and therefore has an entirely different approach to market-making than centralized exchanges. However, this creates a need for liquidity to facilitate trades and swaps. Without adequate liquidity, the AMM (automated market maker) that Sovyrn employs will suffer high rates of slippage and divergence from external market price. Sovryn overcomes this through liquidity providers.
Every trade generates a fee. These fees are distributed among liquidity providers as a reward, in exchange for their market-making service. The fees collected by the system and rewarded to LPs can be seen here - What are the fees?
You can participate in Liquidity Mining events. These events reward liquidity providers with SOV tokens, depending on how much liquidity they provide and for how long in a given time frame.
You can provide your liquidity by going to the yield farm page under the Finance menu on the dapp.
See the yield farm guide here.
Set the gas limit by hand to 500000 units, and gas price to 0.06 GWEI.
Yes, recommended web3 wallets like MetaMask and Nifty support hardware wallets like Trezor and Ledger directly. There is no need to keep it connected to your PC after you have finished with the interactions. Sovryn is working on interacting directly with hardware wallets, so stay tuned.
Some of the pools are part of the Sovryn DAMM (dynamic AMM) pool, which does not require equal deposits of both assets within a liquidity pool. This allows Liquidity Providers to deposit one of the assets on only one side of the pool if they choose to.
Some pools, including the SOV-RBTC pool, require 50/50 provision because they are Bancor-AMM v1 pools.
Check the percentage splits on the yield farm page to see at a glance which pools require a 50/50 split. The pools with a single token listed under Where can I see my provided liquidity? below require a 50/50 split.
Liquidity providers lock their assets in a pool to act as market-makers in return for LP (liquidity pool) tokens – a representation and receipt of their share of assets within the pool. These LP tokens are sent to your connected RSK wallet to represent your share in the liquidity pool. If you are participating in a liquidity mining event (rewards), the LP tokens will be locked in a smart contract and will not appear in your wallet.
The LP tokens received are not issued in a 1:1 ratio with the tokens that users provide. For example, if you provide 10 SOV to a pool, you do not receive 10 LP tokens. The amount of total LP tokens within a pool is dynamic and is not set 1:1 with either of the assets within the pool. A user can receive any amount of LP tokens depending on the pool. So if you provide 10 SOV you may receive, for example, 2 LP tokens. This doesn’t mean that you have lost 8 SOV. Rather, LP tokens are not proportionally denominated with any asset in the pool. In this scenario, you can redeem your 2 LP tokens and withdraw 10 SOV. The AMM records how many LP tokens it has created and given in return for liquidity. When a new user provides liquidity, the AMM creates more LP tokens and gives the user the appropriate amount to maintain accurate relative shares of the pool for both previous and new LPs.
You can add the following token addresses as a custom token in your RSK wallet, which will allow you to see your pooled asset LP token amounts.
Note that if you deposit to your liquidity pool through the dapp and the pool is paying liquidity rewards, the LP tokens are transferred to the liquidity mining smart contract to participate in paying out the rewards. In that case the LP token balance will not appear in your wallet even after you've added the addresses. However, you should see your balance of each asset and the accumulating SOV rewards in the dapp on the yield farm page.
You can withdraw your liquidity at any time without penalty. The only cost is the transaction fee amount. Be aware of impermanent loss and how the time at which you withdraw can affect whether you are at risk of realizing impermanent loss or not.
Within the AMM liquidity pools, the current balance of the two assets can deviate from your original staked balance between the time you provide liquidity and the time you wish to withdraw it. As the market value of one asset moves relative to the other, the asset allocation must be rebalanced to maintain the same proportion in value between the two assets. The number of tokens of the worse-performing asset must be increased relative to the better-performing asset to maintain the balance in value. As a move in one direction continues, the impact of the worse-performing asset grows as the number of tokens increases relative to the better-performing asset. Thus, two assets maintaining a constant proportion in value will not perform as well as two assets held in fixed quantities--regardless of the direction of the market. This is called impermanent loss because there will be no relative loss if the market action returns the assets to the original relative valuations. If the current balance when the assets are liquidated is very different from the original staked balance, impermanent loss will be realized as an actual loss compared to having held the two assets without rebalancing. Sovryn DAMM pools have built-in incentives to minimize impermanent loss compared to the standard Bancor V1 pools.
The staked balance indicates the total amount of tokens staked by liquidity providers, it is a record of the pool’s obligation to its LPs. The contract (or current) balance indicates the amount of tokens actually held by the contract at any time. The current balance can diverge from the staked balance due to the price movement of one of the assets in the pool relative to the other.
Trades generate a fee in the asset of the token converted to. For example, a trade of USDT to BTC generates a fee amount in BTC. Part of this fee is distributed among liquidity providers in exchange for their market-making service, and part is distributed to SOV stakers. An individual's share of the fees distributed to the liquidity providers will be in proportion to the liquidity the individual has provided as a percentage of total liquidity provided in the pool.
A user's share of the liquidity mining rewards will vary dependng on how much liquidity the user has provided relative to the total liquidity in the pool. Rewards are now calculated block by block. A user's reward amount is the user's share of the pool, multiplied by the per-block SOV reward amount (which is set to pay out the event headline amount at the end of the week). For example, if there were 1000 SOV in a loot drop event and 10 blocks in a week (it is actually thousands), then a user would earn 1000 SOV multiplied by the user's share of the pool. So if the user had supplied 1% of the liquidity in the pool at the time the block was confirmed, that user would earn 1000 * 1% = 10 SOV for that specific block.
This feature is coming soon… it is currently in testnet - https://test.sovryn.app/liquidity
The calculation assumes that all LPs hold their liquidity in the pool until the end of the month. Therefore, withdrawals before the end of the month may result in actual returns being slightly different from the predicted return.
The tokens you earn from liquidity mining are calculated at each block confirmation (every 30 seconds). Your reward rate for that block is based on your share of the pool during that specific block. Rewards accumulate as long as you provide liquidity. Rewards are paid in SOV, the governance token of Sovryn. When you withdraw any amount from the pool or claim your rewards, your accumulated reward SOV is then locked in a 40-week vesting contract with your wallet address as the owner. Every four weeks, 10% of the locked SOV is vested and becomes unlocked and available for you to withdraw.