Dive Into Polkaswap’s Rewards
Our last few posts have covered criteria to look for when choosing a crypto exchange, what makes a DEX different from a centralized exchange (CEX), and how Polkaswap is a purpose-built DEX for the composable DeFi future.
Polkaswap’s launch took place on the 27th of April 2021, and in this piece we will highlight and explain the PSWAP rewards that are available to users.
There are 3 ways you can earn rewards on Polkaswap:
- Adding liquidity on Polkaswap
- Buying XOR from the Token Bonding Curve (TBC) with ETH or DAI
- Earning market-making rebates for trading at least 1 XOR, at least 500 times a month
Rewards will be earned from the get-go, but there will be a gradual rollout of viewing and claiming functions. You can claim the rewards from this user interface.
PSWAP Rewards : Liquidity Provision and LP Farming Bonus Rewards on Polkaswap
The first way to earn PSWAP rewards on Polkaswap is to provide liquidity on the DEX with XOR and any other token. Liquidity providers will not only get 0.3% of each swap in fees, but will also get special strategic bonuses in the form of PSWAP tokens.
If you are hodling XOR, instead of keeping your tokens idle in your wallet, you can put them to work earning you passive income by contributing them to a liquidity pool. There is a risk of losing funds via Impermanent Loss, so please enter the liquidity pools with your eyes open (!). If you provide at least 1 XOR in a given pool, you will be able to claim LP Farming Bonus rewards. There will be 3.5 billion PSWAP available for farming rewards, with 2.5 million distributed per day over the span of approximately 4 years. Check out this article for more details.
Polkaswap users will earn PSWAP tokens for providing liquidity in any XOR-paired pool. If you contribute to the XOR-VAL, XOR-PSWAP, XOR-DAI, or XOR-ETH pools, your reward is doubled
By providing liquidity on Polkaswap, you’ll be stimulating the flow of trades, ensuring that transactions are quickly completed, improving the attractiveness of the DEX, and contributing to the acceleration of the DeFi future!
Unlike more complicated systems on other chains, on Polkaswap you won’t have to stake liquidity provider tokens to be eligible for your PSWAP rewards. There is also a vesting coefficient that increases how many PSWAP tokens you get daily; the longer you provide liquidity, the more tokens you will earn.
Please keep in mind that you won’t be able to claim your PSWAP rewards immediately because there is a PSWAP Strategic Bonus Vesting that is dependent on the Polkaswap transaction volume and the amount of PSWAP tokens burnt daily.
PSWAP Rewards: Buy XOR from SORA’s Token Bonding Curve
A token bonding curve is a smart contract that takes one token as an input and outputs another, using a mathematical formula. A token bonding curve can automatically issue, sell, and buy tokens at prices that are determined by the mathematical functions used.
In contrast to a linear supply-price function, the token bonding curve helps provide forward guidance for the market by tweaking the bid-ask spread to incentivize early buyers while keeping the price of the asset attractive for later buyers.
After the Polkaswap launch, XOR will be managed by a bonding curve supporting ETH, DAI, PSWAP, and VAL as reserve tokens — DOT and KSM will be added at full launch. Users who help collateralize the bonding curve by buying XOR with ETH, DAI, DOT, or KSM will earn PSWAP as a reward, and help grow the SORA ecosystem ⸺ DOT and KSM purchases will earn double rewards because both tokens will be used to secure parachain slots for the SORA network.
In exchange for this support, 2.5 billion PSWAP tokens have been allocated as rewards for XOR buyers.
The PSWAP rewards to be earned are calculated exponentially as a function of current reserves: the lower the reserves at a given time, the greater your rewards for helping boost them. Hence, early adopters can expect to earn greater PSWAP rewards before mainstream adoption. If you’re interested in the math behind the token bonding curve, check out this article. As with liquidity provider rewards, the PSWAP rewards are vested and the vesting schedule is determined by the daily token burn.
In order to get these rewards, you need to make sure that “TBC” is selected as your market within the “Swap” screen, then swap. If you have “Smart market” selected, you will not be entitled to receive them.
It is important to note that the token bonding curve does not guarantee the stability of the price of XOR, but rather a measure of forward-guided price predictability.
PSWAP Rewards: Market Making Rebates from Trading XOR
The third way to earn PSWAP rewards on Polkaswap is to conduct a high enough volume of transactions to qualify for the market maker rebates. Market Makers perform strategic predictions to boost the liquidity of the exchange by buying and selling in large volumes, as well as carrying out arbitrage with other exchanges and liquidity sources. There is an intrinsic risk that market makers assume in placing a large number of trades on a new DEX, and that is why the Polkaswap dApp will intentionally reward market makers with PSWAP rebates.
Polkaswap will distribute a quantity of PSWAP proportional to trade volume to market makers who conduct at least 500 transactions per month, with a per-transaction amount of 1 XOR or more (excluding transaction costs).
However, as with rewards gained through yield farming and XOR purchases from the token bonding curve, market maker rebates will be vested and distributed as a fraction of the daily token burn. For details, check out this article. For more information on Token Bonding Curves, check out this article.
A Word or Two on PSWAP Rewards’ Vesting Schedules
You’ll notice that PSWAP rewards earned via all of the three rewards programs explained above must be vested before they can be claimed. The vesting of tokens is done automatically (though you will have to claim them) and is an increasing linear function of the number of tokens burned from usage fees. The ability to view PSWAP rewards as they accumulate will be implemented soon, but in the meantime, you can estimate your potential earnings using the pswap.info platform.
This guarantees that a sudden supply of tokens will not immediately flood the market, and gives clear forward guidance about the supply of tokens in circulation.
The vesting speed depends on the amount of PSWAP burned from Polkaswap usage fees. Earned PSWAP are vested as Strategic Bonus Vesting, wherein the amount vested is a percentage of the daily amount of PSWAP burned in transaction fees, as shown in the figure below. This percentage is 0 at launch and will linearly increase up to 55% in 5 years.
Questions? We’re here for you.
Finance is complex, and DeFi can feel like another level entirely. Polkaswap leverages complex concepts that we believe will improve market efficiency and benefit our community in the long term. We are also committed to taking this DeFi journey together — so if you have questions, don’t hesitate to reach out to us via Telegram.
We also suggest downloading Fearless Wallet for a test drive of the DeFi wallet custom-built for the Polkadot and Kusama ecosystems. And stay tuned for further updates.
About SORA NEO Network, Polkaswap, and Fearless Wallet
SORA is a new economic system aimed at creating a supranational, world economic system with built-in tools for decentralized finance (DeFi). The SORA network implements a new kind of parachain architecture on the Polkadot and Kusama network, with the capability to bridge external blockchains (like Ethereum) to the Polkadot ecosystem.
One of the DeFi applications that will run on the SORA network is Polkaswap, a non-custodial, liquidity aggregating, cross-chain AMM DEX designed uniquely for the Polkadot ecosystem. Polkaswap will offer boundless liquidity through its one-of-a-kind Aggregate Liquidity Technology (ALT).
Fearless Wallet is a mobile wallet designed for the decentralized future on the Kusama and Polkadot networks, with support for iOS and Android platforms. It offers an awesome user experience, fast performance, and secure storage for your accounts. Fearless Wallet will integrate Polkaswap functionality for easy, decentralized swaps of assets.