Bringing the ultimate Defi to Hive-Engine???
One of the biggest stories of late is sushiswap. Sushiswap is a fork of uniswap, which is an opensource tool for creating liquidity pools for exchanges. I've been involved in hive-engine, a layer two exchange built on top of Hive, as well as Steem-Engine before that for a few years now. I've come to what should be a relatively easy conclusion that liquidity is king.
What is liquidity?
It's about the amount of money on the exchange and the velocity in which it trades back and forth. The reason why it's so important is that with high liquidity you can get current pricing, market pricing, and depth so that you can do large orders at a time.
What are liquidity pools?
Liquidity pools are smart contracts where people contribute into them as a group. Then traders have the option to engage with the pool and prices are mathematically determined. Uniswap is using a formula that's based on ratios of tokens in the trading pairs in the smart contract.
Ultimately it's a way to make sure there's lot of money available in a pool so that if people want to move between pairs they can and it's doing so in a decentralized manner through smart contracts and combined liquidity.
Why am I writing about this?
Because all this sushiswap nonsense really got me thinking about liquidity pools on Hive-engine and I think we've come to the conclusion that we create the smart contracts here so that Hive-Engine can offer them!
Why would I contribute to a liquidity pool?
Generally speaking people that contribute tokens to the pool are compensated in some way. So, if Splinterlands sees this and likes it after it's functioning then they could incentivize players to contribute to the pools by offering various rewards in various amounts to players that add liquidity.
Why would they want to do that? Because having a giant pool of money that is meant to help people trade in and out of DEC for hive and then other tokens makes DEC more liquid and thus more valuable. If the Splinterlands token is more valuable then it helps everyone in the ecosystem!
Wen moon?
Well, we have to build the damn thing. But I think we're going to rearrange some roadmap stuff to put this in. If it all goes according to plan, which it never does... it should be live in (redacted). So, if you're a token or tribe token owner it's time to start thinking about what rewards you could be offering people to make sure there's a lot of liquidity in a pool to get your token more easily traded and thus more valuable.
If this is something you think is valuable and you want to support the ecosystem, consider running a market maker on dswap.trade, hodling some BEE and Workerbee, and sharing the story on social media of what we're trying to do here and the games that have already been built on Hive-Engine.
The liquidity of DEC has really gone up. I was trying to swing trade some of my earnings and the liquidity has sky rocketed! Cool for the space and benefit for the system as a whole but sucks for my ability to trade a bit lol.
I think Uniswap sounds great!
Congratulations
Already staking BEE and trying to run market makers :-) I'm not sure I'm adding all that much liquidity however :-0!
Oh well, it will grow in time.
Oh yeah, a good open source market maker project that I have played with superficially in the past is HummingBot. They even help exchanges with liquidity pools by running contests for their users.
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LOL
If you are going this way, and I highly recommend you do, because "pooling" is almost revolutionary and I don't see it going away. Sushiswap will most likely stay as well.
I would like to have pooling and swap on Hive and Hive engine. It would also be nice to have Hive Engine a bit more decentralized and secure.
About incentives.
A regular LPs fees on Uniswap is 0.3% per trade. But since this is extremely important I recommend to build an incentives distribution bot/platform.
Make incentives in Hive and the token. Token owner want to give incentives in Hive and token A. He deposit them in the platform and make a setup for distribution over the next period. Liquid Providers then jump the pool and farm the incentives. Example like this are starting to pop up on ETH now as well.
In this way there will already be an easy to use platform so this can grow fast.
You know, my annualized ROI on powered up HIVE is above 15%. Not bad considering just how low risk it is, wouldn't you say? And at current prices, it's like 99% chance of the price of HIVE going up. HIVE is a no-brainer 100-1,000x candidate. To have your money invested in something like that, and be making >15% a year while you wait, ain't that bad.
That's the opportunity cost for anyone considering extremely high risk "liquidity pooling".
Which one would you choose?
True. Hive has one of the best apy in the industry all things considerd.
Plus you actualy use it, conect and discuss with people and maybe learn something on the way :) That can be very valubale as well!
That being said, we can still play around, explore new things and keep our eyes on Hive at the same time.
Its also most likley that with this defi thing if you dont know exactly what are you doing you will loose.
Ill keep my game on Hive and play around with defi with small ammounts that I'm comfortable to loose.
The one where my funds are not locked for 3 months and I can instantly withdraw them :p
It all depends on your time horizon. 😉
Thing is, it's self balancing. Return is liquidity/fees, so if people decide it's not worth it, returns go up until people decide it is.
The other part is that hive engine is already powered by a 0% apy liquidity pool. It's called limit orders. These are the current incentive to leave assets in the market, and people obviously do respond to the incentive. "Market Making", which LPs are crypto's attempt to decentralize, is the incentive to "close the gap" between the buy and sell limits. There are already groups working to add limits for uniswap, and those will increase functionality and liquidity, and hive engine would be simply doing it from the other direction. We can assume some of those limit orders are people playing the market, and they would rather just play both sides as a market maker.
There are also real buyers and sellers, in fact, lots of them.
Not so sure closing the spread is such an urgent need, to be honest, but, whatever.
Nicely said though - it's obvious you have more background knowledge on this than most who are on the hype. Hopefully you'll pass some of that on where it'll do some good.
Thanks for the comment, and don't get burned playing with fire.
I agree that the incentives have to be organized and your idea is quite good.
Another (maybe even better;) choice would be to change the concept of HE and apply a trading-fee (for the pools at least) and that trading fee will be used for the incentive (like on Uniswap).
In addition: If someone transfers token into the pool - let's say after a week in the pool or after a trade is performed - a part of the already paid 1% deposit fee (maybe 0.5%) can be paid back as an incentive to place the tokens in a pool after the deposit.
If theres one place that needs liquidity its HIVE engine, will have a look into some pairs and see where I can support it
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Not true, it needs volume, people trading then liquidity comes in. Liquidity without volume is worthless, and volume creates liquidity - it's worth to do amm on token with high volume.
Pooling is basically amm and it's not going to work without volume.
I think it's a chicken and egg conundrum.
If I want to trade, I'd choose an Exchange with good amount of liquidity. and if I want to provide liquidity, I'll opt for pools with low liquidity but high volume :)
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no.
If you add 1M$ liqudity to swap.eos on engine it will change nothing.
If you add liquidity to dec it will decrease profit shares for other liquidity providers. Doesn't affect volume at all, people not going to trade it more cause you added x to liquidity, it can affect price initially but nothing more.
Volume comes from people interested in trading(buying/selling) not from liquidity.
Am providing 10k hive liquidity on DEC and much more on uniswap, and from my experiments there are maybe 3 coins on engine that can generate profit on liquidity. And any next L provider will decrease profit. Basic V/L formula :)
Generally i don't see how pooling could co-exist with engine itself :)
maybe with 0 fees and farming token that will give shares from 1% deposits/withdrawals...
Alternative pairs could be interesting and doable on pooling, like you can have everything to btc in pooling and ignore hive, so it would be complete new layer on engine and it would get a lot of btc deposits = profits from 1% to share with liquidity providers
If you build it, they'll come. Hard to offer 0.3% of fees if Hive-engine doesn't charge fees, but like you say, incentivising will be up to the project managers.
I've spent the last week trying to wrap my head around uniswap, and I think enough has percolated through the layers of Simpsons quotes and ex-girlfriend's birthdays that I kinda get it; and it's an incredible concept.
Yes!
Creating a whole other attack vector. An attacker waits for a huge pool to develop at xyz price and then comes in and buys it all at once, gaining cheap control over that amount and leaving everyone else with their pants down without moving price. In an organic situation, with the liquidity that naturally corresponds to the given case, price would rise in positive correlation, making each new coin bought proportionately more expensive and leaving market participants more fairly compensated on both sides of the trade.
Be careful with this can of worms being opened on HIVE!
The way liquidity pools usually work is that by buying a huge amount of something you would push the price up. The price is not fixed, but varies constantly and according to which side of the market pair gets bought/sold.
We'll see how it works out. If it was really feasible, you can bet Wall Street would have discovered it years ago - and it's not like they haven't had hoards of MIT grads working on it either.
Algos game, and can be gamed.
Trash in, trash out. You know the old saying.
Auction markets continue to be controlled by humans for a very good reason. Nobody in their right mind is running out there creating "liquidity pools" for the pink sheets now, are they?
Lots of people are going to get hurt with this "pie in the sky", and don't say I didn't warn you.
I mean Uniswap was around for two years now and it works without any issues - it has more trading volume than most of the centralized exchanges.
And I'm sure Wallstreet wouldn't use something like that, but they generally don't like and use decentralized solutions, so that's logical.
As you said we need to see how it will work out on HE to see if it will be something good.
As far as I have understood how these pools are working is, that before you can buy at the pool's price you have to add your tokens into it (what makes the tokens more expensive). So if the attacker want to buy all tokens against HIVE at once, he must be only one who owns all the HIVE in the pool. If somebody else has HIVE in the pool then the attacker's HIVE are not sufficient to buy all the tokens.
So your concern about 'cheap control' can't work and it should be secure.
Well, but correct me if I'm wrong. Maybe my assumption is wrong.
@aggroed this is a great idea. Unfortunately, the 10-15% yields as curation are no match to Defi yields. In terms of this, adaptation is needed or else Hive will be left out from at-least this perspective for this current cycle we're in.
Adapt or be passed by unfortunately. That's not to say other aspects can't shine, but it seems foolish to miss out on this when it could work so well!
The liquidity will solve a big problem and make Hive-engine/Hive eco-system tokens a great deal more successful if there is a thriving liquidity pool.. this a must.
You might want to think about taking it a step further, by either offering Hive-engine tokens or a brand new HiveSwap token that is liquidity mined. This could create further interest.
In conclusion pooling is an excellent idea, and liquidity mined Hive token (based on stake pooling) could be a boon to the ecosystem.
Keep up the idea and I believe it would add great value to the Hive ecosystem.
Wow, this would be one of the most interesting development around Hive-engine. Really proving that Hive is a full portfolio of cryto technology and applications.
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Cool stuff, hive-engine should be listed on hivedapps.com in my opinion under a DeFi category :) It's technically a DApp built on the Hive Blockchain similar to nftshowroom or splinterlands.
https://twitter.com/KennyCrane/status/1304716839373672450
I think borrowing and lending be enabled first through decentralized contract system on hive to build basic infrastructure as was done through maker, compound etc on Ethereum. Once that is done then we should move to liquidity pools. But all this requires that hive engine becomes decentralized through some sort of reward mechanism.
Trading fees paid by traders should be enough incentive for liquidity providers. Don't ruin the game economy by adding extra rewards for LPs.
On the Hive Engine i miss some swaped Steem...
Hope you recognize it for fixing it.
Transaction Steem Blockchain @commentcoin to Hive-Engine @Alucian:
Transfered to graphene-swap- 69.000 STEEM
3 days ago
#SWAP.STEEM alucian
https://steemd.com/tx/8e0631585dd17fa9beaf5f6e11076f10672d477a
Thank you for helping.
Alucian
Cool, do it and let's see how it plays out.
You know what I like? The image of the little pony!!! Hahaha... Cute and colorful! Hahaha...
But very well said... Your knowledge was good enough!
Probably he wanted to put a pegasus :)
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It's brilliant idea. Love it. It's a yes for me!
Excelent