Wombex Finance

<blockquote>It’s a time discuss deeply how vAPR is calculated</blockquote><h3 id="introduction">Introduction</h3>Wombex is 10 days old now! What are the stats?In just ten days after launch Wombex accumulated &gt;40% of total veWOM locked and attracted $70m TVL in stablecoins and BNB staked to Wombat.Now Wombat is mining as much as ~44% of total WOM issued daily. It’s a lot. The boost on some Wombat pools is bigger than 10x.<blockquote>However, the main question that remains to be answered by the community is: why do LPs still receive significantly more WMX as a reward than WOM?</blockquote>It looks like there should be a considerable amount of WOM in rewards. It’s true. Wombex mined these rewards, and now they await distribution to LPs.This article answers this question and clarifies everything for liquidity providers.<h3 id="strong-the-rewards-distribution-logic-in-wombex-strong">The rewards distribution logic in Wombex</h3>The reward distribution logic in Wombex inherits the Convex one, which in turn inherits Synthetix logic for liquidity mining rewards distribution.This logic was initially developed to prevent sandwich attacks on TVL, smooth APR over time, provide more predictable APRs, and offer incentives for LPs to be longer in the pool. Now, the two most successful projects in veToken aggregation — the original Convex and Aura.finance are operating using this reward distribution logic.To better understand the mechanism behind the reward distribution, let’s look at some graphs charts below:<img src="https://miro.medium.com/max/1400/1*wgrTJj3TErumbnMM_jazJA.jpeg" />Suppose the pool has received R1 WOM tokens as a reward. The distribution of WOM begins instantly with a reward rate of R1/7days per second. The slope of the graph is the rate, and the area below is the amount of WOM distributed to users.Now imagine that at some time a new reward R2 is mined by the pool.The question is: how will the protocol distribute this reward between the users?<img src="https://miro.medium.com/max/1400/1*UvaCjG23neW7IJDCq3g5sQ.jpeg" />When the reward is added, a new reward ratio is calculated as shown on the graph: we take the remaining undistributed rewards from R1, add the new reward R2 and begin distribution of this new sum over a new period of 7 days with the new rate:<img src="https://miro.medium.com/max/1292/1*Yzic-hx06OCNXsMNp0SovQ.png" />But what if the new reward is too small and the merge will lead to a lower reward ratio?This situation is illustrated on the graph below:<img src="https://miro.medium.com/max/1400/1*tj1dayxGsH_DyotSmgot7w.jpeg" />If we do as in (2), the slope (reward ratio) will decrease and the amount of WOM distributed to users per second will drop, despite the fact that we received a new reward. Strange, isn’t it?To decide whether we merge the rewards or not, we solve a following equation:<img src="https://miro.medium.com/max/1108/1*EQJfOCjjhdwtTjdXg7wrGA.png" />If it holds, we merge and update the period and the reward rate. If not, we postpone the new reward until the end of the current 7 days period. When the next reward arrives, the queued reward will be added to it and accounted for in the calculations.This is done to prevent prolonging the period every time a small reward is added. Such behavior could lead to indefinitely postponing the reward distribution and dropping the reward ratio.In simpler words, every time a reward is mined we either increase the reward ratio or keep it the same until the next period, never make it lower.To prove our words, let’s take a look at the balance of <a href="https://bscscan.com/address/0x6E85A35fFfE1326e230411f4f3c31c493B05263C" rel="noopener noreferrer nofollow">LP-BUSD</a> (0x6E85A35fFfE1326e230411f4f3c31c493B05263C) pool on BscScan:<img src="https://miro.medium.com/max/1138/0*sLpo7j_airvQKDcY" />The screenshot from bscscan for BUSD-VAULT contract (0x6E85A35fFfE1326e230411f4f3c31c493B05263C)All this WOM is waiting to be distributed among the Wombex liquidity providers according to the scheme we described above.Here is an on-chain data <a href="https://dune.com/wombex_finance/wombex-pools" rel="noopener noreferrer nofollow">visualization</a> regarding mined WOM (left chart) and claimed WOM (right chart):<img src="https://miro.medium.com/max/1400/1*6fKngWk_ERYpfhzCukkECw.png" />Wombex: WOM mined vs WOM distributed to LPsConclusion &amp; takeawayCurrent rewards (the WOM share of it) will continuously grow and should increase in several times according to our boost factors and on-chain data for already collected WOM.Thus, the most advantageous strategy in Wombex is stake-and-wait, as the rewards will only grow with time the longer one provides liquidity. At some point, this process will come to equilibrium and reach the maximum APY one can get on Wombat. SocialsTwitter: <a href="https://twitter.com/WombexFinance" rel="noopener noreferrer nofollow">https://twitter.com/WombexFinance</a>Discord: <a href="https://discord.gg/wombex" rel="noopener noreferrer nofollow">https://discord.gg/wombex</a>Telegram: <a href="https://t.me/wombex" rel="noopener noreferrer nofollow">https://t.me/wombex</a>

Wombex: digging deeply into vAPR

Table of Contents

Wombex Finance

Outros artigos publicados em 24 de nov. de 2022

4 Essential Skills for Forex Trading

The Crypto Illuminati: Podcast Notes 📝: What the Media Refuses to Say About FTX

Do Kwon responds to Terra's Luna Foundation Audit

Choise.com joins FinTech Alliance

dForce integrates Celer IM into dForce Trade—Enabling Cross-Chain Token Swaps

Metaverse as the Future of Business

Join our free newsletter for daily crypto updates!