wARRR Liquidity Staking Guide
The Pirate Chain (ARRR) community is proud to announce that wARRR is now live on the Binance Smart Chain DeFi platform, making it possible to stake liquidity on pancakeswap and earn a percentage of the rewards!
TL;DR
Attached to the end of this article is a downloadable step-by-step guide to swapping ARRR to wARRR and staking in a pancakeswap liquidity pool. Skip ahead if all you need is the guide, but if you are new to providing liquidity, I would recommend taking the few minutes to first read this short article which explains many of the common questions and risks.
wARRR, what is it good for?
Pirate Chain (ARRR) is its own coin with the industry’s leading privacy by default for all P2P transactions. As a privacy first project, it does not natively host decentralized exchanges on chain (the added meta and unique transactions erode privacy). That is why the Pirate community is proud to introduce wARRR!
The bridge to swap ARRR for wARRR at a 1:1 rate is now live! This process is known as “wrapping”. When you wrap a coin from its own unique chain (like ARRR or BTC), to its wrapped version (wARRR or wBTC) you are making a tokenized version of it available for use on a host chain such as Ethereum or Binance Smart Chain (BSC). A vote was held, and the Pirate community chose to go with BSC due to its significantly lower fees and higher usability.
Once you obtain wARRR through the bridge, you are able to use it the same as any other token on the Binance Smart Chain. Pancakswap is one of the most popular products available on BSC. Its a DeFi style exchange for swapping from one token to another. Unlike a legacy exchange (like the stock market), there are not buy and sell orders waiting to be matched, but instead a liquidity pool. Holders of wARRR are able to deposit their wARRR into the liquidity pool to earn rewards!
IMPORTANT NOTES:
1 While Pirate (ARRR) is a privacy chain where transactions can not be monitored, wARRR is a transparent token. Every transaction you make with wARRR is visible on the Binance Smart Chain. The transaction on the BSC chain in no way reduces the privacy of transactions on the Pirate Chain. They are completely separate.
2Through the bridge, 1 ARRR always equals 1 wARRR. This means if you hold wARRR, you will always be able to exchange it for an equal amount of ARRR at any time.
3There is a 0.5 ARRR fee when wrapping ARRR to wARRR, and a 0.5 wARRR fee for unwrapping. Each transaction in wARRR has a 1% fee, of which 0.5% goes to Pirate chain development, and 0.5% goes to the liquidity providers.
What are Liquidity Pools?
In general, the term Market Liquidity refers to the ability of an individual to purchase or sell an asset without causing a drastic change in that assets’s price. When there is a significant amount of liquidity, you could place even a very large order and only slightly affect the price. In crypto, a coin pair is said to have low liquidity when orders of a typical size and frequency cause the market price to swing significantly.
On a standard exchange like the stock market, you have an order book that lists all of the buyer’s and seller’s orders. A trade is made when an order is matched. If there are not enough counter offers on the order books, your order may not be filled or you may exhaust all the reasonably priced orders changing the price drastically.
In DeFi, there are new exchanges for swapping that do not rely on order books. We now have Automated Market Makers (AMM). The AMM is an algorithm that uses the available funds in its pool to attempt to fill orders based on recent market activity. If the amount of funds in the pool are too low as compared to the size of your order, it will cause the price to change drastically. This is called slippage. The goal of this type of exchange would be to allow you to swap one token for another, where even a large order would not affect the price significantly.
Read more about what a AMM is: https://academy.binance.com/en/articles/what-is-an-automated-market-maker-amm
In a decentralized exchange, these pools are funded by liquidity providers. Any person can deposit liquidity and in return, receive a portion of the fees equal to their share of the pool. In the case of wARRR, you would deposit an equal value of wARRR and BNB (BEP20). The AMM goes to work making trades with the funds in the liquidity pool. If you have deposited 1% of the total amount of funds in the pool, you would receive rewards equal to 1% of the fees collected from the trades and other transactions on BSC.
So are there risks?
If the trade pair is wARRR and BNB, the contributor to the liquidity pool will deposit both wARRR and BNB. The AMM will attempt to make orders in a method that maintains this even balance. In a market where the price between the two stays relatively stable, the trade pair stays in balance and you earn rewards at sometimes significant rates.
There is a risk when the price of one asset changes drastically from the price of the other. Lets say BNB stays the same, but suddenly many people are trading for wARRR and the price goes up significantly. This would cause your account to become mainly BNB over a short period of time. In this case, it may be possible that you would have missed out on possible earnings from the increase in wARRR’s value. You may have earned more by simply holding pirate and not having it in the liquidity pool.
This is called impermanent loss. The name can be misleading as depending on when you withdraw form the pool, these losses can certainly be permanent. Just because you earn fees on transactions, there is no guarantee that you will earn more by participating in a liquidity pool vs simply holding the underlying assets. Before putting your funds in a liquidity pool you should understand the current market conditions and fully understand impermanent loss to decide if putting your funds in a liquidity pool are right for you.
Impermanent loss is explained well in the article: https://academy.binance.com/en/articles/impermanent-loss-explained
Staking and Rewards
You may have heard the term staking and wondered what exactly it means. When funds are added to a liquidity pool, they can be withdrawn at any time at whatever the current balance is. When you deposit these funds in to the pool, in return you receive CAKE-LP (Liquidity Pool) tokens that represent the funds you have in the liquidity pool.
When you stake your LP tokens, you will receive rewards proportionate to your share of the pool. If you deposited 2% of the total liquidity pool, you will receive 2% of the fees when people use the exchange. You will receive these rewards as wARRR over time. You can claim the rewards at any time which means your reward balance will be moved to your wallet to be used as you decide. You could use the bridge to swap back to ARRR, increase your stake, trade on pancakeswap, or anything else you choose.
Understanding BEP20 vs BEP2 before acquiring BNB
If you plan to add liquidity on pancakeswap for the wARRR/BNB trading pair, you will need to deposit an equal value in BNB and wARRR. Before you do, it is first important to understand the difference between BEP20 and BEP2.
In the attached step-by-step guide you will use MetaMask and BEP20 BNB for the liquidity deposit. BEP20 refers to Binance Smart Chain mainnet BNB coin. The addresses will start with “0x”. This is not to be confused with the Binance BNB token who’s address starts with “BNB”. This can be quite confusing if you are new to Binance. Some wallets only hold the BNB token, which you will not be able to send to your metamask Binance Smart Chain address.
Once you have acquired wARRR, the best place to get the Binance Smart Chain BNB (BEP20) you need for the liquidity pool would be pancakeswap as the fees you pay will at least be going to the other fellow stakers. The trouble is, you can not swap wARRR for BNB, without first having BNB to pay the fees. I know, a bit of an odd chicken and egg scenario, but this is how DeFi and tokens work.
To make things easy, I would recommend using simpleswap to acquire a small amount of Binance Smart Chain BNB to cover the required transaction fees.
(I am not affiliated with simple swap, but I have used it myself and can report it worked very smoothly. The above link is a referral link, I will earn small percentage if you make a swap using this link.)
Conclusion
This article should have provided a rudimentary understanding of wARRR and liquidity pools. There is a significant amount of information touched on in this article. To learn more and ask questions, please come visit us in the #warrr channel on https://pirate.black/discord
Thanks to jesse@yourpersonalcryptoassistant.com for putting together this downloadable step-by-step guide that will walk you through all the steps to successfully earn rewards staking wARRR
Download wARRR staking guide:
IMPORTANT LINKS
wARRR Token Contract
Staking Contract
Pancakeswap
Dextools
wARRR Website
wARRR FAQ
wARRR Guide
