It is less than 48 hours until wLEO goes live and is open to the general public. This will be a breakthrough for the tribes on Hive with LEO being the first to move offchain. It follows the path that wHIVE took. The big difference is that things, hopefully, will work out a bit different.
To be successful in the DeFi market, liquidity is vital. Those projects that have a fair amount of liquidity provide confidence to investors. There is nothing worse than taking a big stake in something and not being able to exit because of a lack of liquidity.
A lot of large LEO holders are volunteering to step in and provide liquidity. Leofinance itself is going to put up $20,000 towards the LP in an effort to get it as funded as possible. Couple this with the large LEO holders who are going to move tens of thousands of LEO (along with the equal ETH) and we could see a well funded LP after a week or so.
Uniswap is the only start of the planned evolution of wLEO. The idea is that, once a token is ERC20, it is easy to move the token to other exchanges. This will likely start with the other decentralized exchanges and, possibly, move to centralized ones.
This could provide another important variable in the DeFi world, activity. Without volume, projects face the same problem as a lack of liquidity, investors shying away because they can't get out of their position.
Arbitrage opportunities exist when many exchanges are carrying the token. Some will be more liquid than others, providing a closer spread. Thus, we could see situations where one can buy on one exchange and sell on another for a profit.
Uniswap requires a liquidity pool to be funded with wLEO and an accompanying amount of ETH. It has to be a 1:1 ratio. Of course, as trades take place, this ratio will shift. At the same time, depending upon the availability tied to the demand, prices might increase.
An increase in the price of wLEO would enable one to refill the liquidity pool. This is done by taking the wLeo out of the pool and selling it on the market. Presumably there will be a profit which will move the originally staked ETH as well as the same from the sale of wLEO to end up in one's wallet.
If the person has additional LEO, this could be wrapped, and placed in the liquidity pool along with the matching ETH. Thus, we see more LEO in the wrapped state while the individual booked a nice profit from the original run up in the wLEO price.
The key is going to be whether non-Hive people will start buying wLEO and adding to the liquidity pool. There are obviously LEO (wLEO) rewards being added in addition to the transaction fees. Is this enough incentive to attract outside users to get involved? Time will tell but this is what gets the juices of those on the Ethereum DeFi network going.
It could be an interesting 90 days.
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gif by @doze
Posted Using LeoFinance Beta