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A few thoughts on The WLEO Liquidity Pool - Insane Returns and Minimal Risks

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Zebedee
@revisesociology
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4 min read

The WLEO Liquidity Pool bonus seems like the deal of a Leo Lifetime, even before the crazy LEO price pump we're all hoping for!

As I understand it, 300 000 LEO will be distributed over a 12 week period proportionate to amount of WLEO stakeholders provide as liqudity once the whole WLEO Uniswap thing goes live.

300 000 LEO over 12 weeks is equivalent to 25 000 LEO a week, or 108, 033 LEO a month.

I'm planning on putting in 5K LEO (which makes the math nice and easy if you wanted to do it in yer head), but the amount I'll get back will depend on what the total amount of WLEO contributed will be.

It's impossible to know how much LEO is going to wrapped and staked to the liquidity pool, but we can guestimate....

There's a relatively limited supply of currently liquid LEO, but recent PD figures show just over 1 Million LEO on PowerDown.

I doubt if all those PDs are going to go 'all the way' and end up staked in WLEO, and even if they do the full amount can't be staked for the entire 12 week period. People are also limited by the amount of ETH they have.

So let's say that 500K WLEO end up being staked on average for the 12 week period, then a 5K WLEO stake would give me 1% of the liquidity returns (funny how the math worked out so easily, huh?!).

My returns would then work out at 1083.0 LEO a month (or 3249.0 LEO over a total 12 week) period), which is a 260% annual return on my 5K LEO investment.

HOWEVER, I'd effectively need to halve that as I need to match my LEO with ETH, which gives me a 130% annual return on my total staked LEO + ETH.

If we end up with 1 million staked WLEO, that would yield me 0.5% of the liquidity pool, or 541.5 LEO back in a month (1624.5 LEO over three months), or a 130% annual ROI, or 65% if we halve that to take account of the ETH stake too.

I'd then have to add on my share of the fees for any swap transactions that occur over those three months, but minus any GAS fees for setting up the all of the associated transactions.

These calculations are broadly in line with what @jk6276 calculated in this post here, but for a 1.25% stake and worked out in dollars.

How does this compare to regular LEO curation returns?


Based on my last month's curation returns 18K staked LEO yielded me 50O LEO in curation returns, or a 36% return, which is quite a lot worse than both of the above scenarios.

In fact, I'd need the total amount of staked WLEO to average out at 2 Million for the duration of the promotion in order to my regular curation returns to beat the WLEO liquidity pool share returns.

If I've done the math right, this is an insanely generous offer!

Other advantages to getting in on the WLEO Pool

  • Besides the bounty returns, you get fee returns from staking (as I understand it)
  • I get to learn about a new aspect of crypto - Uniswap (unless that's a downside? I need to learn about something new!)
  • I get a stable return from the bounty I like slow and steady.
  • I get paid out in WLEO, so I'll have some liquid to benefit from any price pumps.
  • It's doing @leofinance a favour - I guess this is the most important aspect in some ways!

But what are the downsides/ risks?

  • The regular security/ cock up risks of losing all yer damn ETH or WLEO to the, well, 'ether'.
  • GAS fees going crazy and ending up with all yer WLEO and ETH locked because you don't want to pay $50 to get it all out of there.
  • Missing out on short term gains from a crazy WLEO pump.
  • Something I don't fully understand is 'pool balancing' - I'm a bit worried I may end up with WLEO that's maybe not worth as much at the end of the 12 week period?
  • I guess you have to take off any earnings you would have earned from curation or staking yer ETH elsewhere when yer calculating your real profits from this whole venture!

Final thoughts


While there are risks, I think a 5K LEO in is a sensible amount for me and based on the math above, I think the returns justify the relatively small risks, most of which are 'not making even more money' by holding off, and I want to contribute to the pool as it's good for the Leo platform.

At the end of the day I think this kind of slow and steady thing just suits my personality, and with the returns on offer, I think this all looks very favourable!

Honestly, buying and earning 20K LEO earlier this year was the best thing I've ever done on Hive!

Posted Using LeoFinance