Pact.fi Liquidity Pools Activity

Aim: We aim in this post to find out total mints and burns by day for all pools. What are the most popular pools where wallets mint LP? Do we see an increase in mints in the ALGO/GOMint, ALGO/GoBTC, and ALGO/GoETH pools from the AlgoMint incentive?Folks Finance is offering incentive in the ALGO/GoETH starting on April 8th, do we see an increase in mints in this pool from the incentive?Is there any evidence of an increase of mints on certain days? Does the increase come from any specific pool and was there an event that caused it?

Introduction About Pact.fi

On the Algorand blockchain, Pact is a decentralized automated market maker. Using this protocol, users can seamlessly switch between $Algo and other ASAs. The system provides deep liquidity and low transaction fees, and enables users to perform secure swaps trustlessly. The Algorand team aims to become the liquidity hub, with six key pillars: decentralization, access, immutability, security, and permissionless swaps.

How Does It Used?

As an alternative to Ethereum’s uniswap V2 model, Pact.Fi uses an automated market maker to provide constant products. By contrast, liquidity is created not through buyer and seller orders, but through liquidity pools in which decentralized investors pool two tokens in equal parts. As risk compensation for these pools, users can swap tokens from these pools, and liquidity poolers receive fees and other rewards. The most unique feature of Pact.Fi is that it offers 100% of the liquidity pool fees to its liquidity providers. The current fee is 0.3% per swap.

Admins are unable to control pools or funds since they reside in inaccessible smart contracts. The stake consensus mechanism in Algorand gives them immutability. As a result, Pact.Fi can never control your liquidity pool. As a consequence, users aren’t protected from serious exploits such as Tinyman. In case of the provision of liquidity on an AMM, this is a very significant risk to accept.

Risks on Pact.fi

  • Loss Impermanent: It is critical to consider whether the rewards for providing liquidity outweigh the probabilities and scale of loss impermanent. 
  •  Asset depreciation: In short, you have to hold two assets for a certain period of time. It is almost certain that one of these assets will be more risky than the other. Do not provide liquidity unless you believe in both assets.
  • Exploits on pools: Pact.Fi can never control your liquidity pool. This results in users not being protected against serious exploits like Tinyman. If you are providing liquidity to an AMM, this is a very significant risk you should accept.

From the below tweet we can see that Folks Finance is offering an incentive starting on April 8th to encourage investors to invest in ALGO/GoETH.

Here in this article we are going to talk about the total mints and burns across all pools by day. In the graph below you can see all the mints and burns that Pact.fi has made. In total, we can see that more than half of all transactions belong to mints: 84.91%. The following chart shows the maximum number of mints for the week of April 10-16, 2022. At first, there were not many mints or burns seen, but from April first week onwards, we have seen an increase in transactions on both sides, through minting and burning. Therefore, we can say transactions have increased.

According to the Pact.fi Burns and Mints heat maps, we can clearly see an increasing trend of mints and burns from April 1st week 2022 onwards.

From the below, we can see the number of wallets on Pact.fi performing mints and burns. The total number of wallets from February 18, 2022 to April 30, 2022 was 4.93K. Among the 2 operations (mint and burn), Operation Mint contributes the most to the total wallets (77.02%). In fact, from the 1st week of April 2022 on, a greater number of wallets are performing mining and burning than ever before.

In the following graph you can see the mints for ALGO/GOMint, ALGO/GoBTC, and ALGO/GoETH. From the beginning of April, the AlgoMint incentive caused an increase in mints in the ALGO/GOMint, ALGO/GoBTC, and ALGO/GoETH pools. In this screenshot you can see there was a lot of minting taking place by AlgoMint. From the 3 Pools, Pool ALGO/goMINT PACT LP Token is the highest contributor (49.24%) to the total Transactions. Maximum transactions of 366 were observed in April 15th, 2022, and only the ALGO/GOMint process was done 269 of these transactions. There is an increasing trend among transactions. We can see that the transaction rate of all 3 pools has been significantly increased since the 1st week of April 2022. 

Furthermore, here we can see the ALGO/GoETH pool is also experiencing an increasing trend in its minting from April 8th 2022 onwards. There might be an increase in mints since Folks Finance has an incentive program starting on April 8th in the ALGO/GoETH pool, hence we see an increase in mints in this pool. Following a few days, however, the minting from this pool began to decrease.

There will be more mints during April 15th, 20th, and 29th 2022 dates. As you can see in the below graph, it is the pool ALGO/goMINT that is causing that increase.

In the following graph you can see the burns for ALGO/GOMint, ALGO/GoBTC, and ALGO/GoETH. From the beginning of April, the AlgoMint incentive caused an increase in burns in the ALGO/GOMint, ALGO/GoBTC, and ALGO/GoETH pools. In this screenshot you can see there was a lot of burning taking place by ALGO/goMINT PACT LP and ALGO/goBTC PACT LP . From the 3 Pools, Pool ALGO/goMINT PACT LP Token is the highest contributor (43.12%) to the total burns of Transactions.

Observations

  • Using the above analysis, we can see that the maximum number of mints were issued during the week of April 10-16, 2022. In the beginning, neither mints nor burns were seen, but from April first week onwards, we have seen a greater number of transactions on both sides. As a result, we can say transactions have increased.
  • Taking into account the two operations involved (mint and burn), it is operation mint that contributes to the most wallets (77.02%). From the 1st week of April 2022 on, a greater number of wallets will perform mining and burning than ever before.
  • The AlgoMint incentive began at the beginning of April and increased mints in ALGO/GOMint, ALGO/GoBTC, and ALGO/GoETH pools. There was a maximum of minting taking place through AlgoMint.
  • From April 8th 2022 onwards, the ALGO/GoETH pool is also experiencing an increasing trend in its minting. In the ALGO/GoETH pool, there will likely be an increase in mints since Folks Finance is starting an incentive program on April 8th. If this happens, we will see a rise in mints.
  • It appears that there will also be more mint dates on April 15th, April 20th, and April 29th 2022. This increase can be attributed to the pool ALGO/goMINT, as you can see in the graph below.

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