How To Get The Most Out Of Liquidity Mining?

Published in

Platypus.finance

7 min readJan 14, 2022

Understand our rewards mechanics to maximize your return!

From the previous ELI5, we revealed the secret sauce to liquidity mining yields — staking $PTP to get extra token emission! In this article, we offer the go in depth on our rewards mechanics to show you how to maximize your returns on Platypus. Let’s cut to the chase!

A. What factors play a role in determining your returns?

As hinted by the formulae from our previous articles (Part I, Part II), the yields from liquidity mining are based on various factors:

1. Stablecoin Deposits and Staked PTP

Keeping all other factors unchanged, the more stablecoins and/or PTP you stake, the greater the token emissions you receive.

2. Capital Allocation Strategy

Your asset allocation matters when calculating rewards. If you stake more PTP and less stablecoins, you can get more from the Boosting Pool but less from the Base Pool. The crux is whether the token emissions from one pool can fully compensate or even outweigh another in the range of volatility of liquidity weights. We’ll flesh out some examples as we go.

3. Your Deposits Relative to the Weights of Aggregate Liquidity

Liquidity providers receive pool shares proportionate to their liquidity provision (“LP”) in the entire pool, which is prone to fluctuations. Your returns will decrease as the overall liquidity increases. If more people provide liquidity, the aggregate deposits and/or weights will naturally increase. Simply put, your portion of the pie will get smaller as the pie grows bigger.

4. Choice of stablecoin

Maintaining a high exposure to a certain asset where one pool has a much higher weight than the others will guarantee more tokens from liquidity mining. You may need to consider which stablecoin to deposit when allocating your capital.

B. How do you maximize your profits?

With the various factors accounted for, we will use three case studies to demonstrate how you can maximize your profits as an LP for Platypus.

Case Study 1: Allocations of PTP and Deposits

You have an investment budget of 2,000 USD and you decide to contribute 2,000 USDC. The reward metrics based on the USDC pool are illustrated below:

Total Monthly Emission = 3,000,000 PTP
USDC Account Weight = 25%
For USDC deposits,
Rewards Delivered to the Base Pool = 3,000,000 PTP × 30% × 25% = 225,000 PTP
Rewards Delivered to the Boosting Pool = 3,000,000 PTP × 50%× 25% = 375,000 PTP
$PTP currently trades at 2 USD.

While the overall liquidity in the pool is 50,000,000 USDC, the aggregate liquidity in the Boosting Pool amounts to 70,000,000. Assuming that most of the depositors contribute just a small bag of PTP to boost yield, the aggregate weights will not be far from the entire deposit size.

Depending on your allocation strategy, your rewards will vary with the same starting capital.

Plan A: By simply allocating all your funds to USDC deposits, you receive 108 PTP per year from the Base Pool.

Plan B: You deposit 1,900 USDC and purchase 50 PTP for staking.
Since 1 staked PTP generates 0.014 vePTP every hour, you now have 504 vePTP tokens (assume 1 month = 30 days). As a result of PTP staking, you are able to earn rewards from the Boosting Pool. Compared to Scenario 1, your rewards from the Boosting Pool significantly outweigh your accumulated rewards from the Base Pool and now your total rewards grow to 13.8 PTP, which amounts to 165.6 PTP annually.

Plan C: You allocate half of your budget to USDC and half of your budget to PTP, i.e. You deposit 1,000 USDC and purchase 500 PTP for staking.

This allocation maximizes your weight and therefore your token emissions from the Boosting Pool. Compared to Plan B, your token emissions from the Boosting Pool jump to 144 PTP per annum even though you earn much less from the Base Pool. However, this balanced allocation strategy is not necessarily better than a skewed allocation like Plan B in every situation. Let’s move on and see how the aggregate weights of other deposits would impact your yield.

Case Study 2: Impacts of Aggregate Deposits and Weights

Here are several scenarios with different aggregate weights.
You have the same budget as before. Scenario 1 is the same as Plan C. In Scenarios 2 and 3, other depositors have become more active in staking PTP and hence their aggregate weights have increased from 70,000,000 to 120,000,000 as compared to Plan A.

Scenario 2: Same as Scenario 1, you employ a balanced allocation strategy.
Due to a significant increase in other depositors’ weights, your deposit’s weight share and total Boosting Pool token emissions decrease compared to Scenario

Scenario 3: You contribute 1,600 USDC and stake 200 PTP on Platypus.
Contrary to Scenario 2, the amount of token emissions from the Base Pool will outweigh those from the Boosting Pool, which leads to comparatively higher total token emissions. Intuitively speaking, when the aggregate weights exceed the aggregate deposits by a wide margin, it can be more rewarding to assign a larger proportion of your new capital to stablecoins instead.

Case Study 3: Comparing Rewards of Different Stablecoin Accounts

Now let’s consider your choice of stablecoin. We will use USDC, USDT and DAI for this example.

Note that even with the same capital allocation, your token emissions will vary based on your deposit and/or the account weight of each stablecoin pool.

Although USDT and DAI have lower account weights than USDC, they still deliver more PTP emissions due to lower aggregate deposits and weights. By taking a larger share of the token emissions distributed to their respective stablecoin accounts, the token emissions generated by your deposits of USDC and DAI outweigh the token emissions deduction resulting from lower account weights.

C. TL;DR

(1) It is nearly always true that allocating only a small portion of your budget capital to PTP staking can lead to higher monthly token emissions. Even if you cannot attain higher returns in the first month in some extreme cases, you can still achieve it after accumulating sufficient vePTP through staking.

(2) The way to maximize your profits on the Boosting Pool with your investment budget is to allocate half of it to stablecoins and half of it to PTP staking. But keep in mind that this does NOT necessarily maximize your total token emissions for most of the time. The Base Pool returns would also affect your total token emissions.

(3) You can adjust your allocation based on the overall deposits and weights. When the aggregate weights become sizable relative to the aggregate deposits, it can be more rewarding to assign a larger proportion of your new capital to stablecoin deposits. That being said, you can maintain some PTP staking to optimize your returns (i.e. point (1) still holds).

(4) The choice of stablecoin accounts can also impact your returns. Different accounts can have different weightings (both account-level weights and depositors’ aggregate weights). For instance, if the account-level weights are similar, you may opt to allocate your capital to the account on which you can enjoy larger deposit shares and weights.

(5) Finding the exact optimal allocation is difficult to accomplish manually. While points (1) — (5) provide the main ideas of optimization, finding the exact optimal allocation involves complex calculations, which will require some computational tools. Your token emissions are also prone to the actions of others so you may need to adjust or rebalance your allocation time over time. With that said, simple adjustments to capital allocations as shown in the case studies can help improve your returns.

(6) You will lose ALL your accumulated vePTP when you withdraw any of the staked PTP portion. Unstaking PTP will undermine your weight share and your yields. To maximize your profits, refrain from unstaking.