A high-level overview on what balancer pooling is, and how it affects $STONK.
NOTE: This article is slightly outdated in regards to STONK’s role as a token. We will be providing updated articles shortly to better explain things.
Alright, so what in the heck is pooling?
Pool liquidity & arbitrage trading will determine how significant the price pressure of DeFi is on $STONK — as these increase, more DeFi tokens will be sold & bought against $STONK to keep pools balanced.
On a practical level, pooling is the same as securing your funds — e.g If you pool 200 LINK via this one click pooling interface, the balancer will sell off some LINK and buy other tokens so your 200LINK value in $USD is spread out amongst the pool. You will receive BPT which represents your total value in the pool. Your total pool share is calculated by BPT/total BPT supply, which is variable according to how much $$ is injected by everyone collectively into the pool.
To incentivize pooling, our pools have a certain mix of rewards to encourage it.
Earning through liquidity mining & swap fees.
When you pool you are also doing something called liquidity mining passively. Liquidity mining simply means that if you provide liquidity, you will earn https://balancer.finance/ ‘s own token, the BAL token. This should incentivize keeping some of your holdings in the pool.
At the same time while you’re earning off of liquidity mining passively — you’re also earning from swap fees. As trading volume from STONK balancer pools increases as traders follow arbitrage opportunities from the balancer’s exchange, DEXs, and CEXs, so should your swap fee earnings.
These two methods of earning combined leads to lucrative rewards through pooling in $STONK’s multiple pools.
Pooling, trading, and $STONK.
As more people pool & as liquidity enters STONK’s pools, more balancing action occurs. These pools will consistently buy and sell off other DeFi tokens to keep STONK’s share equal in the pools, pressuring STONK’s price in the direction of the DeFi market.
Pooling also opens the door to many trading strategies — e.g if you’re a swing trader, you can pool a % at the top to lock in funds, and depool at the bottom to re-enter in a better position. Likewise, if you’re a stable conservative trader, you can just chuck a ton of your holdings in the pool and know you will be earning passively off of swap fees & BAL tokens as time passes. All of this is happening while traders are arbitraging $STONK against multiple exchanges, including the balancer’s exchange — to keep $STONK balanced & to keep swap fee rewards generating.
Total rewards earnt will be heavily determined by the activity of the pool — this is where STONK comes in — if STONK is active, then the pool will be active, attracting more poolers, which in turn benefits STONK.
This combined with STONK’s unique nature just creates a wonderful ecosystem, presenting a case for very interesting tokenomics. All this trading & balancing activity is also surrounding DeFi tokens in the pool & speculation in DeFi in general — this is how STONK’s value will be derived from it.
Go to https://stonk.dev/#interface or here https://pools.balancer.exchange/#/pool/0xb9eaf49d9f913bC1314e37bb5482891840c8e3C1 for pooling.
For more details on balancer pools and it’s low level math, go to https://docs.balancer.finance
To understand how lucrative liquidity mining may be, read this article that was just published: https://www.coindesk.com/defi-platform-balancer-bal-token-distribution-compound-comp
