The SMR token is the native token for the upcoming Shimmer network, which will help make the major innovations of IOTA a reality. It’s time for IOTA to shine — and we can all be involved in the process.
Liquidity is the first key to the success of any token. With Iotabee, the IOTA community can come together and work to build the best SMR/MIOTA liquidity, creating progress both by the community and for the community.
What is liquidity and why it is important?
Put simply, it’s a measure of how easy it is for people to buy and to sell, with lower frictional costs (that is, direct and indirect costs). If people want to buy a token that doesn’t have good liquidity, they may find it hard to purchase the amount they desire at the current price in the market because there may simply not be enough selling orders out there. For the same reason, people will be less willing to buy this kind of asset because they will worry that they won’t be able to sell it because there may not be enough buying orders in the market at the time. Therefore, to make SMR successful, it’s essential to build a good SMR liquidity, so people can buy and sell confidently, when they want.
How can we build SMR/MIOTA liquidity on Iotabee?
Thanks to the AMM (automated market making) mechanism, no orderbook is needed. Consequently, it’s easy for anyone with SMR and MIOTA token to get involved as a liquidity provider and yield returns for their investment . In CEX, only the market maker can use the bots to fill in the orderbook; this is a common practice generating significant profits. But with AMM, as long as you have the SMR and MIOTA tokens, you can also participate as a market maker to help improve liquidity and earn a yield at the same time. With the Crosschain Swap, Iotabee currently is the only platform capable of enhancing SMR/MIOTA liquidity. Most importantly, SMR is the real SMR on Shimmer layer 1 and MIOTA is the real MIOTA on Tangle layer. No wrapping assets, no gas fees.
What is the initial target for the SMR/MIOTA liquidity pool?
A liquidity pool of 1 million USD (both SMR and MIOTA with a value of 500k USD) would be sufficient to enable easy trading. A trade size of 1000 USD would be instant and the price impact (real executed price shift) will only be 0.2%. In order to achieve this, about 2 million MIOTA will be needed in the liquidity pool. This should be relatively easy to achieve. However, we will need the same amount of Shimmer in the liquidity pool, because that is how the AMM works. Because there is much less Shimmer in the market, this is the place where we need your help. Consider joining Iotabee as a SMR/MIOTA liquidity provider. Your participation is essential to build a solid SMR/MIOTA liquidity.
What are the benefits to a SMR/MIOTA liquidity provider?
In addition to helping strengthen the liquidity of SMR/MIOTA, the liquidity provider will get an attractive yield in the process. The industry standard trading fee for AMM trading pair is typically 0.3% for most trading pairs and 1% for trading pairs with high volatility. Iotabee will initially apply the 1% trading fee for SMR/MIOTA, simply because we will expect high volatility during the SMR price realization process. Of the 1%, 83% of the fee will go to the liquidity provider and rest will go to Iotabee so that the team can cover some of the initial costs and will remain able to continually improve the product. Once the volatility decreases to a certain level, the fees will revert to the 0.3%, of which 0.25% will go to the LP and 0.05% to Iotabee. We see huge potential for the LP yield, especially initially, because the price realization in the early stage always leads to massive trading volume; the 1% trading fee triples the reward. (For example, if the average trading volume remains at half a million USD per day in the first 30 days, the 1 million USD LP fund will increase to 1.135 mllion USD and annual yield in this period could be in excess of 160%.)
What are the risks for a SMR/MIOTA liquidity provider?
AMM is an amazing design which empowers normal investors to profit as market makers. However, there is a term called impermanent loss (link) which could happen if the price of a trading pair keeps drifting towards one direction. This is a smaller risk for SMR/MIOTA in comparison to SMR/USDC or any other potential trading pairs, because Shimmer is the staging network of IOTA and any potential boom of SMR will benefit the price of IOTA. This is one of the principal reasons that we believe SMR/MIOTA is the best AMM trading pair.
The design of Iotabee Crosschain Swap has eliminated the potential severe DeFi risks of bridges and wrapped assets. The partially centralized mechanism solves these problems; however it needs to be built in the right way. Firstly, Iotabee constantly maintains transparency, so everyone can check their balance in the Iotabee wallets and compare it with the amount that appears in liquidity pools. Secondly, the Iotabee dev and risk control team has built a system to the highest security standards, with real-time asset checking thanks to our partners from the TanglePay and BitForex team.
How to participate?
Iotabee is launched on Sep 7th to a selected group of Earlybees.
If you are interested in helping to build the best liquidity for SMR/MIOTA for the good of Shimmer and earning an attractive yield at the same time, please join our Discord channel and you can have an opportunity to get an early access to Iotabee to get ready for the launch of Shimmer!
Iotabee Discord: http://discord.gg/j8y8zWDDcT
More about Iotabee: Deep Dive into Iotabee — All you may want to know
