Impermanent loss on SOV/rbtc LP

Sov/rbtc LP bounty ended today.

TL;DR: Looks like most LP’s are gonna breakeven their rewards with their impermanent loss, so would be good to know how much we made from fees.
Also, button to withdraw Sov/rbtc LP is greyed out at the moment.

Requesting some clarity on these matters to avoid FUD.

Before the trading launch, I asked @yago about the risk of impermanent loss, and he said if IL would outweigh the rewards, the exchequer committee would step in to compensate liquidity providers.
This might be relevant.

Myself, I deployed my LP @ 35,000rbtc per sov. Since then price has done 366% increase, resulting in 23.72% loss according to my amateur calcs, or a loss of 149.8 SOV if I understand correctly.

Meanwhile, my rewards are gonna be right around 145-150 SOV + fees.
So it looks like it will go out at breakeven, except the reward SOV is vested over 10 months whereas LP sov was freed, but now… well, lost if withdraw LP.

For people that started LP on the second week (starting april 20th) I assume a price of 75,000 sats (range of that day: 63k-88k) which gives an IL of 11.4%. For these people, my amateur calculations say that the rewards outweigh impermanent loss by 10%. So 10% gain + fees, but in 10 month vested tokens.

I made the amateur calculations here:
https://impermanentloss.github.io/calculator/

For myself, exchanging 150 SOV for 150 vested SOV… makes me really itch to know how much extra I have made from fees, to find out if the experience is sweet or bitter. I think others feel the same.

Would be good to have this on the table before we enable LP withdrawal.

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Solid work. I LP’d a little later and my gut feeling is also that, with the rewards, the IL is almost cancelled out. Would be good to see more detailed analysis, as I haven’t had the time to do so.

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Thanks for your explanation and for bringing this up - it would be great to get an official statement on this. I remember the quote from @yago very well too.

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Finally someone else expresses the concerns I have about this. I’ve been chilling and being patient. It’s all good. But yeah, we need some developments on this ASAP or it could create a shitstorm of FUD. Imagine not knowing where you stand in the V1 AMM and refusing to withdraw from the AMM until Sovryn team builds UI visualization tools. Just patiently waiting and trusting that it will come soon and you will be able to make an informed decision at some point in the near future… and thinking that throughout the whole lootdrop period.

Now how would you feel as a LP if there still weren’t any tangible indication of the present value of your position (much less any indication of the IL status) by the end of the lootdrop? And then SOV goes live on a centralized exchange and the IL goes from bad to much much worse. That’s a scenario that concerns me. I want to know where I stand so I can decide how to proceed. Right now it’s even more important than ever because we know the IL will hit hard when SOV gets on Uniswap and runs up to 300,000 sats.

If we’re the only LP option that’s a different scenario with different risk, than if we are 1 of a few DEXs on different chains, which is altogether different than a centralized exchange buying a huge inventory block of SOV and making a SOV market on Binance… all very different scenarios with very different responses from me. But my reaction has to be informed by my present position… which I have not known for 3.5 weeks.

Am I being rewarded for entering this black box? I trust that this community will choose to reward its LPs well because we must if we want to have liquidity here. So I have personally not had any FUD whatsoever about the project vision, honesty, or competence. But I’m getting impatient with this aspect of the AMM, especially when compounded with the fact that I haven’t received anything substantive, or even any promise of a reward that might make this level of risk worth while.

So, that’s why I’m personally voting in favor of BabelFish sale but also beginning a draft SIP for the things that we need to provide for our LPs in order to ensure they are incentivized to stay the course. If we think we can retain liquidity by churning LPs… we’ll fail. So it costs us next to nothing to drop V1 LPs an incredibly rare glorious Sovryn artistic treasure NFT. Why don’t we go ahead and formalize that we’re going to do that for V1 AMM LPs? Well, that’s what this SIP is all about. I don’t want future token launches on Sovryn to be burdened by our internal discontent. It’s not their responsibility to please our LPs, that’s our responsibility. So let’s do it. What do the LPs want? What do we think is fair? I’m half LP and half Bitocracy so I think I can judge selfishly what is fair for us… but not until I know where I stand with IL and lootdrop rewards.

I don’t want to start asking for stuff when I don’t know how much I’ve lost or what I could reasonably expect to ask for. I hate it when people try to write themselves a blank check everywhere… like “my name is Jim, so everyone named Jim should have unlimited money!” I don’t even acknowledge that perspectives and I don’t want to come across that way. So please help me be a responsible and proactive member of this community by helping me visualize my present position in the V1 AMM. Thanks!

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By the looks of it right now, the rewards are going to offset the impermanent loss, and the fees will then guarantee the profit.

Thank you for your post that is some great stuff!

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@NOVAX -great post. Looking forward to your SIP. let me know if you need help.

@AlykzAlex - thanks for getting this convo started.

It is extremely difficult to offset impermanent loss accurately with LM - because IL changes with each transaction and no one wants to see their Loot rewards changing all the time. My back of the envlop calculation is that with fees pretty much all LPs made 10% APY at the very minimum (most probably made more).

However, a sticking point is the fees calculation, which is still not in the frontend. This needs to change, and is being worked on.

A new LM rewards system is near production and will make future Loot drops much easier and smoother.

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Yeah, I think you’re right. It appear that I’m safely above 10% gain actually. Looks like I made about 17% net! I’m excited for the new lootdrop system! Saw Surfer posted the market-maker visualization that’s looking sharp! Let’s fill up the FISH pool next :laughing:

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Hi all, @yago @exiledsurfer
I hope the team is doing great today.
I don’t know what is the issue with the LP but after providing 200 Sov for 1 month, I just got back 119 now. I find the IL huge.
I received 0.14 rbtc for 0.08 and have 52 sov rewards.
I don’t really see the benefit of LP
Regarding the numbers, I think that a part of the reward could be release, in order to cover the difference.
Any thought?
Are they any other rewards to come?
Keep up with the good job

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Hi!

According to your calculations I get this:

200-(200-119)+52+((0.14-0.08)*100.000.000/120.000)=221

221>200 —> you would gain 21 SOV

I only suggest you buy SOV at 120,000 sats with the 0.14-0.08 rbtc you have earned.

I did something similar!

Permanent Profit!

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Thanks for your answer.
That’s exactly what I did as well.
The only thing which is not okay is to have the reward vested as it’s actually part of my token to be break-even on the LP.
Hopefully the team will realised that as well and unlock that part.
I’m very happy to realise that some people here really share some valuable tips.
I wish you a wonderful weekend. :raising_hand_woman:
Stay sov

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I participated in the pool knowing that the rewards would be vested, thus increasing my voting power.

Stay Sovryn!

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Same here. Still excited for a founding market-maker NFT though!

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