For all Swappi users: Here’s a brief guide on how to maximize your profits on Swappi.
Adding Liquidity
The first action you can take to earn more on Swappi is to add liquidity to a pool. When you add liquidity to a pool, two things will happen:
- You’ll get an LP token that you’ll be able to redeem for the assets that you provided to the liquidity pool. For example, if you added CFX and ETH to the CFX-ETH pool, you’ll get a PPI-LP CFX-ETH token, which you can redeem at any time for the amount of CFX and ETH that you provided to the pool.
- You’ll earn 0.17% of all the trades done in that pool.
You can think of the LP tokens as getting some avocado seeds. Now that we these sweet avocado seeds, why don’t we do something with them?
Farming
The LP tokens that you obtained by adding liquidity to any pools are self-custodial. That means that you can keep them in your wallet and transfer them to other users. Whoever holds those LP tokens (PPI-LP CFX-ETH) can redeem them for a the amount of CFX and ETH that you added to the CFX-ETH liquidity pool.
Instead of sitting in your wallet, what if you staked them on Swappi and got another token in return? Well, in Swappi, the process of staking is called “farming” and when you farm you get PPI tokens in return. This is the equivalent of planting our avocado seeds so that they can grow over.
As you can see, different farms offer a different APR Range. It’s almost self-explanatory, but the higher the APR, the higher the rewards you’ll obtain.
You can also that different farms have different Weight. Weight is the proportion of PPI rewards that each farm receives as a proportion of each PPI produced in each block. In simple terms, the higher the weight of a farm, the more PPI you will receive.
Staking & Boosting
Once you farm your PPI you can stake them in a farm. Staking PPI involves locking it in a farm for a certain amount of time (from 1 week to 6 months). When you stake your PPI you can boost the amount of PPI that you can get as yield on a farm. Think of boosting as using fertilizer on the seeds that you planted. You can boost your rewards up to 3x.
The boosting factor is calculated with the following formula, according to Swappi’s documentation:
The boost mechanism will calculate your earning weight by taking the smaller amount of two values.
UserBoostShare = min {UserLPShare, UserLPShare*0.33 + 0.67*TotalLPShare * (UserLockedPPI/TotalLockedPPI)}
In simple terms:
- Boost Factor = Lower number between
- The amount of LP tokens that you have and
[(LP Tokens you own) * (0.33)] + [(Total LP Tokens) * (0.67) * (Amount of PPI you locked / Total Amount of Locked PPI)]
You can use the Boost Simulator to calculate the boost factor you can get and to plan out your strategy.
As you have probably noticed, APR isn’t a specific quantity but a range. To maximize the APR that you can get from farming, you’ll need to: a.) stake a higher amount of a LP token in the liquidity pool and b.) stake a higher amount of PPI. In other words, the more LP tokens and PPI you stake, the more you earn.
Strategies
As you all probably now, investing in DeFi is risky, so i have to give some disclaimers:
- This is not financial advice!! The following are just common sense approaches that I’m sharing that reflect the way I think about investing in Swappi.
- Educate yourself on additional risks such as smart contract exploits, etc. Even though the Swappi team has been very transparent with the smart contract audits done on Swappi and multiple bug bounties, there can still be some risk.
- Never invest what you can’t afford to loose.
- DYOR
Now let’s see some of the strategies that I thought about. These strategies can help you mitigate risks and protect you from impermanent loss or they can be riskier and give you higher earnings.
So far, all farms include either CFX or PPI. This is for obvious reasons (CFX = native currency in Conflux, PPI = main token in Swappi). But both CFX and PPI can be very volatile, and this volatility can lead to impermanent loss.
For those who don’t know, impermanent loss happens when you add liquidity to a liquidity pool and then the assets that you added change their price.
Strategy #1: Conservative Unboosted
Choose the CFX-USDC or CFX-USDT. Any of these farms will expose you to the volatility of just one asset, either CFX or PPI. Do not boost your rewards, because boosting them means holding PPI, which exposes you to its volatility. In this strategy, you’ll be exposed to the volatility of CFX, which is highly volatile and to a non-volatile asset (USDT or USDC).
Strategy #2: Conservative Boosted
Choose the PPI-USDT farm. This farm will expose you to the volatility of PPI. It is safe to boost this farm since you’ll only be exposed to the volatility of PPI.
Strategy #3: Balanced Unboosted
Choose CFX-ETH, CFX-BTC or CFX-BNB and don’t boost them. This strategy will expose you to the volatility of 2 assets, one of them being CFX (more volatile) and the other being a less volatile asset (ETH, BTC or BNB).
Strategy #4: Balanced Boosted
Same strategy as High Unboosted, just boost your rewards. This strategy exposes you to 3 assets, but a significant part of them are less volatile.
Straetgy #5: YOLO
CFX-PPI pool + boosted. While this exposes you to 2 assets, they are the 2 most volatile of all the farms. This is the riskiest strategy, but with high risk come high rewards, so go big or go home.
Let me know if you can think of better strategies!
The Final Combo
I already showed you that you can multiply your earnings. First by farming. Then by boosting. But there’s a final trick. Leave some CFX for staking in a PoS staking pool. The Conflux team just announced a Liquidity Incentive Program for Swappi, in which they will invest a significant amount of funds into the CFX-PPI liquidity pool. Those funds will be farmed and a significant amount of the will be used for boosting. A quick back of the hand estimate suggested that they’ll easily get around a 3X boosting. All of the funds obtained from boosting will be airdropped to users that stake (details pending).
Please share any other insights you might have.
P.S.- Use the calculator to simulate your earnings…
