Pros & Cons Of Investing A Small Amount Of wLEO Into The Liquidity Pool

LeoFinance
29 days ago
4 Min Read
769 Words

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Image Source / Pixabay.com

That's the big question. Is it worth it? After initiating the power down of my staked LEO almost one week ago, I've been learning all I can about the wLEO/ETH liquidity pool.

I'm happy to report that for myself at least (this is definitely not financial advice), joining the liquidity pool appears to have more merits than drawbacks.

How Much Is A Small Amount

Running through the numbers, I don't think 250 wLEO matched equally with ETH would be worth it. There's one exception to that assumption that could change a first time investors' mind. I'll get to that Pro later.

The 500

Today, I hit my goal of attaining 250 liquid LEO (not to be confused with wLEO or the liquidity pool).

Taking that unstaked LEO along with another 250 about to come out of my vestings will bring my total wLEO to 500.

Investigation Using The Uniswap Tool

Uniswap doesn't require you to connect an ETH wallet to use their Swap or Provide Liquidity functions. You won't be able to take any action but the tool is still helpful.

Heading over to Uniswap.org and opening the app drops you on the Swap Page. To check info about proving liquidity, hit the pool tab up top.

This will bring you to a page that looks like the one in the image below. Select 'Add Liquidity'.

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Uniswap's Add Liquidity Page shows two fields of entry; one for your amount of ETH and another for the pool you want to provide liquidity to. In this case it's Wrapped LEO.

Make sure to grab the wLEO Contract Address provided on LeoPedia.io. This ensures you aren't entering a false listing.

Next I use the wLeo address to find the asset on Uniswap:

wLEO Address

0x352c0f76cfd34ab3a2724ef67f46cf4d3f61192b

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Click 'Select Token', then enter the wLEO address in the token search field. Wrapped LEO will appear below. Tap to select the asset.

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The last step I took was to enter my amount, 500 wLEO into the bottom field. Uniswap populated the matching ETH in the top field automatically.

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As you can see in the image above, using the tool provides helpful info even without a connected wallet. I can see for example, exactly what percentage of the pool my 500 wLEO would be if I entered right now.

It comes out to a small .06% share of the entire wLEO Liquidity Pool

Doing The (Approximate) Math

.06% isn't accurate because there's $50,000 in the pool that doesn't count towards the 90 day incentive program. It is accurate if I wanted to approximate my annual yield. Two very different aspects of joining the pool.

For argument sake, let's say more investors enter the pool and my percentage ends up being the .06%. How much LEO would I earn from the incentive plan?

The initial distribution in the incentive plan was 300,000 tokens. Multiply that by .0006 and it equals 180 tokens. That would be paid out over 12 weeks which comes to 15 tokens per week.

Is it worth it for all that to earn 180 extra tokens in 90 days? Maybe so, maybe not. At .20 per LEO (assuming it hits that value soon), 180 tokens comes to $36.00. Enough to cover my gas fees and a little more, hopefully.

What Overcame My Reservations

Coming close to pulling the plug in the whole operation, I rethought it for a while.

Entering and exiting the pool wouldn't help. I'd have to be in it for a longer duration to make it worthwhile. If the pool explodes, it could drive my take down even lower.

Then there is impermanent and permanent loss to consider. Without going into great detail about this topic, it could result in missing out on a rising value of liquid non-pooled LEO.

In the end, I see only two real reasons to disregard these concerns:

  1. The experience has taught me a ton already and I can write about it all.

  2. There's still a whole lot of UNI tokens yet to be airdropped!

UNI?

Yes, UNI. How Uniswap will distribute all those remaining governance tokens isn't yet known. It could be a simple swap or failed transaction like last time.

Or it might end up being an airdrop only for liquidity providers. Who can really say? But it's an extra incentive for sure.

Thanks for reading and as always...

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Posted Using LeoFinance Beta