Today's will be an important insight into how Liquidity Pools work on the MetalSwap dApp.
We will answer the question:
"Where does the liquidity that allows us to open new swaps come from?"
The answer is “from Liquidity Providers!” and with this article we’ll deep-dive into this topic.
At the moment, all the liquidity is provided by the DeFi Foundation, as this type of activity has not yet been incentivised. In fact, we preferred not to reward those who provide liquidity so that we could be the only ones to do so in a relevant way in the first months of the dApp's life.
Here we will learn how does the Liquidity Providing work on MetalSwap's dApp, Live now on the ETH MainChain (and Goerli testnet!):
To access the service, simply log on to the address:
for Ethereum mainchain, or
to act on Goerli Testnet,
and then click on the "Liquidity Pool" in the top menu
We will see this following screen
Liquidity Pools Dashboard
With the "Create New Position" button, we can make our ETH, WBTC, USDT and the newest WPAXG liquidity available to those who need to open a Swap on the other side!
For this, we will be rewarded with XMT, and a NFT representing provided liquidity which we will discuss in a moment.
MetalSwap rewards Liquidity Providing with $XMT, thus distributing the voting power of MetalSwap’s DAO to those who actually use the platform, both from the side of liquidity providing and the side of a new Hedging Swap opened and kept active.
Encouraging liquidity providing is important because it permits the whole system to scale up with the platform usage, allowing more people to use the Hedging Swap tool.
Everything set? Select your token, the liquidity you’re providing with it…
and just click "Create Position"!
If this is the first time you are providing liquidity, you should click on "ALLOWANCE".
Pay the allowance tx, click on 'CREATE POSITION', and wait until the transaction is confirmed.
Liquidity Pools NFT
Now you will see your NFT appear in the "MY POSITIONS" section.
Those NFTs have a locking period to stabilize the whole system’s liquidity.
Do not forget that the liquidity provided has a 14-days “Locking Period” before it can be withdrawn.This token is representing your liquidity locked in MetalSwap’s platform and will collect rewards over time.
And this graphic is saying something more.
MetalSwap’s NFTs are unique digital assets that are minted using a combination of pseudo-random data from various sources, such as the address of the user, the NFT's ID, the creation timestamp, the liquidity provided, the block height, and the difficulty.
These NFTs are generated directly onchain so no decisions are made by any centralised server! This happens because we save only the creation parameters for the user position, and the single parts of this NFT, are stored in a multiple system of Smart-Contracts. In that sense the image is recalculated each time it is requested with read methods so the gas limit for the NFT creation, is not incresed with the heavyness of the graphic assets.
As an example, one of the three different NFTs shown here is FULL FOIL, meaning has a starry background and represent liquidity WPAXG, as indicated by the chip on the left side and their class, shown on the upper-right. It is important to keep in mind that the various rarities of NFTs do not affect the rewards.
The pseudo-randomness is shuffling under the deck the following info, choosing one in particular for one particular NFT.
The first, on upper-right is the Class, that can be
Then we have the Border, that may be Bronze, Silver, Gold, or Diamond. The colors of the background are chosen between 10 different variables.
And the FOIL probability is always rising depending on liquidity provided.
With FOIL comes the probability of the starred backgroud.
The only non-random thing (except the ID of the NFT that is progressive) is the Chip, that remains relative to the liquidity provided.
At the moment we have 3 different Chips, representing:
WPAXG (the Wrapped version of PAXG)
By clicking on it, we see other commands: the Redeem Reward button still gray in the early moments of our latest NFT life, the possibility to Add or Remove liquidity and a handy tool to Transfer NFT ‘s ownership to another public address directly from our dashboard!
The liquidity corresponding to the gold asset is represented by WPAXG, a wrapped version of PAXG. To better understand this mechanism, read our dedicated Medium!
The "Balancer" refers to the software mechanism incorporated within MetalSwap’s Hedging Swap tool, which facilitates the prioritization of new orders in one direction over the currently active ones. The Balancer is designed to provide incentives for balancing Hedging orders in the direction of an asset with more $XMT given as Liquidity Reward, i.e. in situations where all ETH swaps are bullish. In case the imbalance surpasses a certain threshold, the system activates liquidity protection, which allows opening of new swaps in the downward protection direction until the platform returns balanced.
Now that you have a solid understanding of how things work under the hood, it's time to put theory into practice and see these concepts in action under our hands!
Be sure to click the link to our latest YouTube video for a comprehensive demonstration that brings everything we've covered to life. Thanks for reading, and we look forward to seeing you in the comments and in our Telegram group.
To the MetalSwap
… and beyond!
-The DeFi Foundation
❗ METALSWAP ‘s admins or moderators will NEVER contact you directly on any social under any kind of circumstances.
❗ Everything concerning $XMT ‘s smart contracts and addresses is shared by our official channels (list below), do not trust any different info from any different source.
✎ What is MetalSwap?
With MetalSwap we enable hedging swap transactions through the use of Smart Contracts, AMM style.