Posts

How to calculate liquidity pool token

avatar of @mccoy02
25
Cryptobuzzer
@mccoy02
·
0 views
·
4 min read

source

Hi, there today I will be sharing a very important guide on how to calculate LP tokens, previously I published an article on what is liquidity pool on DeFi system, thanks to everyone who took their time to go through the post.

RBS-BUSD is an example of liquidity pool token, providing liquidity on a pool means you're participating to share commission generated from daily transactions conducted from other traders on RBS-BUSD, take for instance RobiniaSwap listed RBS-BUSD as an LP token when an investor stake/provide liquidity on the mentioned token they will enjoy maximum benefit from every conducted/completed transaction on RBS-BUSD token on the pool, this means the higher LP token you provide on a pool the more you would likely generate from the pool shares.

Let's proceed on how to calculate LP token, there are some parameters/variable one need to take note of before calculating their LP shares.

  • Number of liquidity pool tokens you have on a particular pool.

  • The total number of liquidity pools in circulation.

  • Current amount and price of the token on the pool.

Note the below calculation is for practical illustration on how to calculate LP on the pool so I used a small amount of RBS-BNB to illustrate the calculation on the pool.

  • Step 1: Find the amount of liquidity token you have staked in the farm pool, for this example as shown I have provided 2 RBS-BNB liquidity on the pool.

Step 2: Find out the total number of LP tokens in circulation this can be done by clicking on detail hit the view on bscScan to view the total liquidity supply of RBS-BNB token. *

Note

Although LP tokens ALL bear the same name "Cake-LP", different LPs have different LP contract addresses. This means that the RBS-BNB LP token will be called Cake-LP, and so will the RBS-BNB LP token. But they are NOT the same LP, and the "Total Supply" for RBS-BUSD LP and RBS-BNB LP will differ. So make sure you are looking at the "Total Supply" of the right LP.

Step 3: Divide your total provided liquidity amount by the total circulation supply of RBS-BNB.

Provided liquidity stake = 2 Total circulation supply of RBS-BNB = 5,583.457616

Liquidity pool Ratio = 2/5,583.457616 = 0.0003582

LP Ratio = 0.0003582 × 100 = 0.03582%

This means for every completed transaction on the pool I will get a share of 0.03582% share on pool transaction.

  • Step 4: select Contract from the bscScan page.

  • Step 5: Click on the drop-down box a display of the supply of the total asset-based on BNB and RBS will be shown below we can see the total number of current assets in BNB = 123.70037807 and current asset in RBS = 274,505.83869847

  • Step 6: To calculate your liquidity worth is simply by using the following formula.

Value of current holding = your liquidity pool ratio × Amount of current assets.

From step 3 my LPRatio was = 0.0003582

Current assets in BNB = 123.70037807 and Current asset in RBS = 274,505.83869847

Value of current holding for BNB = 0.0003582 × 123.70037807 = 0.04430 BNB

Value of current holding for RBS = 0.0003582 × 274,505.83869847 = 98.32799 RBS

Base on my Research I was able to calculate the number of token a user is worth if they stake 2 RBS-BNB

Conclusion

From Step 6: it can be seen that the total value of BNB-RBS equivalent value I will be holding at the end of the year depending on pool APR will be 0.04430 BNB and 98.32799 RBS.

This value can also be multiple by the current value of RBS and BNB at end of the year if there is a significant increase in value from each token it's a win scenario for the investor, although if investors chose to remove his stake liquidity it has no effect on his holding let's say I chose to remove my 2 RBS-BNB LP token from the pool I will have 2 RBS-BNB on my wallet with the extra commission earned from the period of days I have provided liquidity on the pool.

*Please note the above conclusion is based on my personal points of view, I stand to be corrected feel free to make your contribution thanks for your time.

RobiniaSwap a newly launched DeFi exchange platform allow users to provide liquidity on its platform pool and in return get rewarded for providing liquidity.

Crypto asset pairs like RBS-BNB, USDT-RBS, Bsteem-RBS, and more can be provided by liquidity providers to earn passive income from pools.

For more information about RobiniaSwap check out the links below

Website https://robiniaswap.com/

Coinmarketcap https://coinmarketcap.com/currencies/robiniaswap-token/

Coingecko https://www.coingecko.com/en/coins/robiniaswap-token

RobiniaSwap Official Documentation https://robiniaswap.gitbook.io/robiniaswap/

Discord https://discord.gg/wGv4UjER2f

Images/screenshots used for this post were taken from my trust wallet app except otherwise stated.