Frequent Asked Questions
1. What is Liquidity Mining?
Liquidity Mining is a feature developed based on the principle of the automatic market maker (AMM), which means that every trading pair that supports automatic market-making (AMM) will be configured with a corresponding liquidity pool, and users are more liquidated. Funds injected into the pool will automatically become a liquidity provider, indirectly become a market maker, and receive transaction fee dividends. BigONE's liquidity mining uses a combination of AMM and order book in the trading mechanism. The system will place the funds in the fund pool in the market according to the AMM automatic market-making algorithm to provide liquidity.
2. What is an Automatic Market Maker (AMM)?
AMM which means automatic market maker model. It is relative to the market maker model of traditional centralized exchanges. AMM is equivalent to a decentralized market maker model and everyone can become a Liquidity Provider. In the AMM model, liquidity providers can obtain fee income. BigONE's AMM is based on the "constant product market maker model" (x*y=k) to calculate the buying and selling prices to provide continuous quotations for the market.
BigONE uses two AMM algorithms:
1) The non-stable currency market (such as ONE/USDT) adopts the "infinite constant product market maker model" algorithm, which can provide liquidity to the market regardless of the price.
2) The stablecoin market (such as USDC/USDT) adopts the "finite constant product market maker model" algorithm to provide more liquidity within a limited price range.
3. What is a Liquidity Mining funding pool?
Transactions that support automatic market makers have a corresponding funding pool for the market, which will provide market-making funds for AMM. When trading, the number of assets of the two currencies in the market capital pool will remain the same as the product. Users can become market makers by providing liquidity to the funding pool and earning the funding pool according to the share of the funding pool bonuses from transaction fees.
4. How can I get profits from participating in Liquidity Mining?
BigONE has liquidity mining pools of different currencies. Users participating in liquidity mining can get 50% of the market's commission dividends. The liquidity mining pools of individual currencies will also increase additional rewards from the platform from time to time.
5. How to participate in Liquidity Mining?
Under "Trade" in the navigation bar on the homepage, click the "Liquidity" button to enter the page, and click the "Add Liquidity" button to enter the page.
Perform "Add" and "Remove" operations on the right side of the page. According to your needs, select the currency that needs to add liquidity. After entering the quantity, you can see "Liquidity Provided" and "Estimated pool share". After clicking the "Add" button, the page will display "Liquidity Added Successful".
For detailed operation, please read "BigONE Liquidity Mining Tutorial".
6. What are the requirements for adding liquidity?
Adding liquidity refers to the operation of injecting liquidity into the liquidity pool, which requires bilateral addition, and the added amount must be greater than or equal to 100 USDT.
7. How to remove liquidity?
Redemption of liquidity refers to the operation of removing liquidity from the liquidity pool. For details of the operation, please read the "BigONE Liquidity Mining Tutorial".
8. What are the requirements for removing liquidity?
After the liquidity is successfully added, it can be removed partly or fully at any time. Partial removal needs to ensure that the remaining assets are greater than 100USDT.
9. What are the risks of providing liquidity?
There may be impermanent losses when users provide liquidity, which is also the most common loss in liquidity mining. This loss is caused by the divergence of the token price, which is a temporary/non-permanent loss of funds that occurs when liquidity is provided. When the price of the token returns, this impermanent loss will disappear.
10. What is impermanent loss?
The impermanent loss refers to the loss of funds caused by the price difference caused by the change of the token price after the user adds the funds to the AMM liquidity pool. No matter the token price rises or falls, there will be an impermanent loss, and the greater the price deviation, the greater the impermanent loss.
1. Assuming that the ONE/USDT fund pool has 9 ONE and 900 USDT, at this time 1 ONE = 100 USDT.
2. After the liquidity provider user A adds 1 ONE and 100 USDT to the ONE/USDT fund pool, there are now 10 ONE and 1,000 USDT in the fund pool. The total value of the fund pool is 2,000 USDT, and the liquidity value held by user A is 200 USDT, with a share of 10%.
3. Trader User B sells 1 ONE to the ONE/USDT fund pool. According to the constant product market maker model (x*y=k), the product of ONE and USDT in the ONE/USDT fund pool is 10*1,000=10,000. After user B sells 1 ONE to the fund pool, the amount of ONE in the fund pool is 11 ONE, and the amount of USDT is 10,000/11=909.091 USDT.
The amount of USDT obtained by user B is 1,000-909.091=90.909, at this time 1 ONE = 82.6 USDT.
4. If the liquidity provider user A chooses to withdraw liquidity in the fund pool at this time 11 ONE and 909.091 USDT, the assets are withdrawn by user A are: 11 ONE*10%=1.1 ONE and 909.091 USDT * 10%=90.91 USDT, The total value of user A's assets is 82.6*1.1+90.91=181.77 USDT
5. Compared with the value when user A invests in liquidity, it is reduced by 200 -181.77 = 18.23 USDT. This 18.23 USDT is the impermanent loss incurred by user A.
*For the convenience of calculation, the transaction fee is not deducted in the above process.
The following is an estimated table of impermanent losses for reference:
|Token price fluctuation rate||Impermanent loss|
11. How is the handling fee charged for the open liquidity mining trading pair?
At present, the AMM market uses an independent transaction rate system, which is different from the ordinary market and has no fee discount. Transaction fees are independent of membership level. The AMM market rate standard is as follows:
The transaction renewal rate of Maker and Taker in the non-stable currency AMM market is 0.3%;
The transaction renewal rate for stablecoin AMM market Maker and Taker is 0.2%.
Total locked value: The total value of the two currencies in the fund pool, calculated in USDT.
Percentage of share: The ratio of pool share obtained after adding liquidity to the total share.
Added value: The value of assets added to the fund pool, calculated in USDT.
Total value: The total value of assets that add liquidity in the current market, calculated in USDT.
The return rate of the day: equal to the commission bonus/total value of the day.