Having completed a successful IDO, and with our Uniswap listing just around the corner, we want to reveal the first functionality that will be live on THEOS — Liquidity Mining. With the introduction of our $THEOS token, we believe its paramount to offer our community with a way of earning passive returns for their support, and an interesting use even before the first NFT-related components are launched.
The Theos.fi Association has decided to list the $THEOS token in several exchanges — both centralized and decentralized. In the first stage, we will fund a liquidity pool in Uniswap V2 DEX. This will provide a way of enabling access to $THEOS tokens to those that couldn’t participate on the first public offering. Furthermore, we will facilitate staking of Uniswap LP tokens within the platform for reward generating activities.
Liquidity Pools and Liquidity Mining
To understand the phenomenon of Liquidity Mining (LM) we first need to understand the concept and purpose of liquidity pools. Liquidity pools are the decentralized counterpart of centralized order books — the mechanism by which buyers and sellers of a pair of assets match their orders and execute trades. In centralized exchanges, users’ orders are matched through internal ledgers that are constantly being updated. In the decentralized scene, centralized order books are replaced by liquidity pools — pools of tokens locked into smart contracts that take the ‘other side’ of one’s trade. In order for there to be liquidity in these pools, fee structures have been designed in order to incentivize actors to lock the tokens within the smart contracts. Basically, liquidity providers receive a pro-rata predetermined percentage (usually ~ 0,3%) of the transactions carried out within the pool. Additionally, projects have developed a now common practice to complement these fees called Liquidity Mining — THEOS will be implementing this practice as well.
In order to enjoy LM rewards from THEOS, you will need to stake THEOS/wETH Uniswap Liquidity Providing (LP) tokens on the protocol. These LP tokens represent a share of the Uniswap liquidity pool, and are issued as soon as you provide liquidity to said pool. LP tokens can be exchanged back to the original asset pair provided.
Risks and return of liquidity mining
Liquidity mining brings forward an interesting and potentially strong opportunity at passive return rates. Depending on a number of factors -such as pool depth (total amount of tokens locked within the smart contract), risk of impermanent loss and smart contract risk — liquidity mining can offer return rates that can range from non-negligent two-digit percentage to exuberant five-digit rates.
Please make sure to understand the process and risks associated with the provision of liquidity to decentralized exchanges. You can read about impermanent loss here.
Liquidity rewards
Just as it is carried out by our incubator partner Occam.fi, liquidity providing rewards will be determined for each epoch — time periods defined by the Theos.fi team, usually a month. A predetermined amount of $THEOS tokens will be set out for distribution in the following epoch, and rewards will be split across everyone that has staked in proportion to the amount they stake. Rewards will be distributed each second, on a pro-rata basis.
As an example, imagine a total of 1.000.000 $THEOS tokens has been allocated for LM purposes for September. These will be redistributed on the following epoch, on a second-by-second basis. Every one staking THEOS LP tokens on our platform in September would be entitled to a pro-rata share of the total amount, so a user with a stake of 1% of total LP tokens will get 10.000 $THEOS in October, distributed evenly each second.
Step by Step Guide
While for some the LM process can be daunting when reading about it, we intend to simplify it as best as we can, taking into consideration both newcomers and DeFi virtuosos. In this article, we developed a step-by-step guide to assist participants throughout the process. We also generated a tutorial video to streamline the process — you can view it here.
Step 1 — Buy THEOS and wETH
In order to begin the liquidity mining process, you must have $THEOS and $wETH tokens in your wallet — only Metamask will be initially supported for LM purposes. You can buy $THEOS by following the ‘Buy THEOS’ button on Theos.fi, and you can buy wETH through Metamask or on any centralized or decentralized exchange of your choosing.
Remember — Liquidity provision requires the same USD amount of both tokens, so you should take it into consideration when deciding the amount for each asset.
Step 2 — Provide liquidity to the THEOS/wETH pool
Once you have both $THEOS and $wETH in your wallet, it is time to provide liquidity to the THEOS/wETH pool.
You can access the liquidity pool contract in Uniswap in a number of ways, but the easiest (and safest) will include a button in our Liquidity Mining staking flow that will automatically redirect you to the correct address, denominated ‘Add Liquidity’.
Continue by entering the amount of both tokens into Uniswap’s interface, and click ‘Supply’ and ‘Confirm Supply’. A Metamask pop-up will emerge asking you to sign the transaction. Uniswap will display information about your transaction, including token rates and share of the pool. After paying network fees and once the transaction has been approved, you have officially provided liquidity. Uniswap LP tokens should be automatically added to your Metamask wallet.
Remember — The first time supplying liquidity, Uniswap will require you to approve the use of the token through a transaction pop-up in your Metamask wallet.
Step 3 — Approve THEOS LP tokens on the THEOS Liquidity Provision page
Once you have THEOS LP tokens, you need to return to the THEOS Liquidity Mining page and approve the use of Uniswap tokens.
This can be done by clicking on the ‘Approve UNI-V@ THEOS/wETH LP Tokens’ button — a pop-up will appear asking for final approval and transaction confirmation on Metamask.
Once the transaction is successful, you will be able to begin the liquidity mining process.
Step 4 — Staking the THEOS LP tokens on THEOS
The THEOS Liquidity Provisions page will now show a ‘Stake’ button, allowing the staking of liquidity tokens.
After choosing the number of tokens you want to stake, you will need to make one final confirmation with Metamask before returning to the page and start generating rewards.
Congratulations! You have successfully staked Uniswap LP tokens and will start to enjoy LM rewards!
Step 5 — Generating and claiming rewards
The liquidity mining process has now officially concluded, and the protocol will work on generating rewards for users that have staked their LP tokens. Once a sufficient amount of rewards have been accumulated, users will be able to claim and withdraw them to their Metamask wallets.
Remember: It’s important to note that claiming the rewards — no matter the amount — will not unstake your LP tokens. It will only retrieve the available rewards balance from the Liquidity Provisions page, where they will continue to accumulate starting from zero after claiming.
Step 6 — Unstaking
The final -optional- step is for those that want to unstake their tokens from THEOS.
Firstly, users will need to input the amount of THEOS LP tokens they want unstaked from the right tab of the page. Unstaking will require a transaction confirmation, after which LP tokens will reappear on the users’ Metamask wallet.
From there, users can exchange their LP tokens back into THEOS and wETH — or virtually any other ERC-20 — tokens through the Uniswap liquidity pool.
About THEOS: The THEOS ecosystem is managed and sustained by our Association, a team of both traditional finance and blockchain virtuosos. We envision a new way of thinking, minting and trading NFTs, and have developed what we believe is going to become the next-generation community-governed NFT platform. THEOS will become the first NFT platform in Cardano, the blockchain with the highest potential out there.
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