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Petting some CUBs and Understanding the Liquidity Pool mechanics!

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Simplifylife
@simplifylife
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What do you do once you've lost your virginity? Try out new positions of course! And that's exactly what I did too!

Took my CUB earned from the ETH-Den on day 1, claimed my airdropped CUBs...bought some more CUB on cubdefi.com and paired 'em up with BUSD to open a new "position" on the CUB-Busd LP Farm! Off the top, 0% fees was pleasant!

I'll go through the steps and try to write down a few common (my own) questions that gets people confused. Had me confused for a while and yes, I have tried reading up on many articles explaining these stuff. After reading I feel like I am a rocket scientist with all the knowledge, but then it's all jaha lau tahai kodu situation. Meaning, I understand nothing. Zero.

The thing with these LPs is, you don't fully understand it till you get your hands dirty. I can't claim I understand the math entirely, but I understand enough to know if I'm getting REKT or not and that's enough for now xD xD

As I did with the ETH staking, I did it all on my phone again with trust wallet. For some reason I have a hard time getting my metamask up and running....so the phone app works best for me.

Step 1

Go to cubdefi.com and find "Liquidity" under the "Trade" tab from the menu bar on the top left.

Step 2 : Add liquidity

Step 3 : Choose your pair

I added liquidity in the cub-busd pool. It better to have some extra BUSD (assuming you're providing liquidity to this pool) to adjust for price fluctuations while you're adding the liquidity.

After you've decided on your pair, you add equal USD amount of both. For example "$100 CUB + $100 BUSD" and so forth.

Next you click on supply, followed by approve supply. There is small transaction fee for approving the supply so have enough BNB in your wallet. This step will give you some LP Tokens.

BUT, after you've approved your pair if you see the balances are still in your wallet, i.e. the liquidity adding has not been completed yet, don't panic. It happened to me too.

You have to repeat step 3 again. And this time when you've entered in the amounts of CUB and BUSD and provided liquidity, you will be shown a prompt showing the amount of "LP Tokens" you will be given. Accept that contract and (AGAIN) pay the transaction fees. Once the transaction is complete you should have CUB-BUSD LP Tokens in your wallet.

Step 4

Go to Farms from the menu bar and look for your desired pool and Approve Contract. Again, pay transaction fees! And then you stake you LP Tokens that you just received by providing the Liquidity. Oh, you need to pay some more fees to stake, AGAIN!

......aaaand you're done!

Enjoy the returns while it's still juicy!

But what are these impermanent losses I keep hearing?

Understanding this can be a a bit difficult at first, it was for me. I'll try to explain in baby language because that's the only way I could understand this.

Rule Number 1 : There are no rules.

Rule Number 2 : The total USD value you put in will always stay the same. Period. You put $200, it will stay $200 6 months later.

Consider the following scenarios :

CUB Price : $4

$100 worth of CUB = 25 CUBs

You add liquidity : 25 CUBs + $100 BUSD (= $200 total)

Scenario 1 :

3 months later you want to remove the liquidity. 3 months later, CUB Price = $2 Your Initial USD worth in CUB = 25 * 4 = $100 You will still get $100 worth of CUB = $100/$2 = 50 CUB BUSD being a stable coin, you get back $100 BUSD. So you entered with 25 CUB + 100 BUSD. You get out with 50 CUB + 100 BUSD

Scenario 2 :

3 months later CUB price = $8 Your Initial USD worth in CUB = 25 * 4 = $100 You will still get $100 worth of CUB = $100/$8 = 12.5 CUB BUSD calculation same as previous scenario.

Now the question is, if the USD value stays the same, where is the loss? Say you bought the 25 CUBs and didn't stake them. In scenario 2, now you have (25 * 8) = $200 worth of CUB. So you're at a theoretical "loss" of $100...considering what you "could" have had, had you not staked. Now apply the same for scenario 1. You hadn't staked your 25 CUBs. But now that the price is $2, you have lost $50. In this scenario, Had you staked your CUBs, you would have been "protected" against a potential loss of $50.

Turns out this calculation is not exactly accurate. I'm reading up more on this and let's see if I can crack the code in a way to explain it!

Of course, none of these calculations take into consideration the amount of reward you have earned in the 3 months by providing liquidity. So by providing liquidity, we are "HOPING" that the rewards make up for the potential losses we may incur, and keep our balance sheets in the green even.

So is putting money in a pool under the reliance of "hope" a wise thing to do? Who knows! But, Rebellions are built on hope, Rogue one!

Posted Using LeoFinance Beta