The Thorchain – An introductory Look at Liquidity Provisioning

The aim of this article is to show the daily changes in the volume of each pool over the past 90 days (added + removed + net), as well as the number of Unique LP-ers who add or remove liquidity each day.

What is Thorchain?

With Thorchain, users will be able to exchange tokens from various networks, including Bitcoin and Ethereum, with tokens from other networks. To trade cryptos, such as Bitcoin and Ethereum, traders and investors use decentralized exchanges, which are unable to facilitate the operation on native networks.As a result of its interoperability, THORChain enables users to directly exchange different cryptos without ever leaving the protocol and without requiring the use of any intermediaries. By depositing cryptos into the Thorchain decentralized exchange, users can earn a yield on their money. Users can also borrow cryptocurrency within minutes.

How does Thorchain Works ?

The Thorchain exchange employs the continuous lending pools protocol of the Bancor DEX to enable cross-chain trading of non-native tokens. Market data for all supported cryptocurrencies is deposited into liquidity pools along with RUNE, the native token of the network. The THORCh automatically exchanges one token for RUNE, then trades RUNE for the other token, when a user initiates an exchange. This is the mechanism that enables non-custodial exchanges between non-native assets.Liquidity pools are created by operative nodes, and user funds can be deposited there for others to borrow, allowing them to earn a yield for the amount they deposit.THORChain relies on the Proof of Stake consensus mechanism, which requires RUNE tokens to be staked in order to verify swap transactions.

Why is it valuable to become a liquidity provider on Thorchain?

Thorchain’s liquidity providers can deposit any amount (or propose new pools) into existing pools, and they will receive both swap fees and rewards from Thorchain’s own emissions. By providing liquidity on Thorchain, holders of marginal assets like BTC and BNB earn a return by allowing their assets to be pooled and traded. Liquidity Providers earn rewards when other users swap assets with them. Returns on liquidity providers are influenced by their share of the pool, the number of swaps compared to the total value of the pool, fee size, and an impermanent loss.

LPs will earn a yield based on the amount they own, swap volume, swap size, change in asset prices, and the Incentive Pendulum, adjusting the amount of rewards for node operators and liquidity providers balances the amounts of capital bond and pooled in the network.

Liquidity Added , Removed & Net Changes Across All Pools

Below is a graph that shows the daily liquidity added , removed and net changes across all pools over the last 90 days. Between August 10, 2021 and November 2, 2021, 56.6M people were added, and 42.53M people were removed.November 1, 2021 recorded the maximum addition of 11.05M, and August 10, 2021 recorded the minimum addition of 0. And also, November 1, 2021 saw a maximum Removed of 6.04M, and August 10, 2021 saw a minimum Removed of 131.92M.

November 2, 2021 and October 28, 2021 have lower total added than normal. October 21, 2021 and November 1, 2021 have higher total removed than normal.On November 1, 2021, the maximum Net Change was observed at 5.01M, while the minimum Net Change was observed at -4.25M.Compared with October 22, 2021 and November 1, 2021, November 2, 2021 has a lower total net change than normal.

Following is a graph that shows the cumulative net liquidity volume of the pools.Liquid removed from August 10, 2021 to November 2, 2021 was 42.53M. November 1, 2021 marked the maximum Total Liquid Removed of 6.04M, while August 10, 2021 marked the minimum Total Liquid Removed of 131.92.The total Liq removed in October 24, 2021 and November 1, 2021 was higher than usual.

These graphs show the daily distributions of added and removed liquidity among pools.The total amount of Liquid Added between October 15, 2021 and November 2, 2021 was 56.6M.A total of 32.86% of the total liquidity added came from BTC.BTC POOLs, and 55.78% came from the top 2 POOLs.The maximum Total Liquid Added of 11M was observed on November 1, 2021, and the minimum Total Liquid Added of 0 was observed on October 15, 2021.Liquid added shows an increasing trend. Liquid added in November 1, 2021 was higher than normal.

ETH.RAZE had the lowest Total Liquid Removed of 3.7K and ETH.XRUNE had the highest Total Liquid Removed of 9.9M.The maximum Total Liquid Removed of 6.03M was recorded on November 1, 2021, and the minimum Total Liquid Removed of 131.92 was recorded on August 10, 2021.Liquid removed from August 10, 2021 to November 2, 2021 was 42.5M.Total Liq Removed in October 24, 2021 and November 1, 2021 is higher than normal.

In the above graph, we can see total liquidity added by the pool versus the amount removed.Total Added is 56.6M and Total Removed is 42.53M.The total removed is 75% of the total added. 32.86% of Total Added was contributed by BTC.BTC Pools, and 55.78% by Top 2 Pools.ETH.RAZE had the lowest Total Removed (3.76K) and ETH.XRUNE had the highest Total Removed (9.95M).

Unique LP -ers Adding & Removing Liquidity

The graph below shows the unique liquidity providers that added and removed liquidity, respectively.Total Liquid LPer removal is 22% of total liquid LPer addition.The total number of Liq LPers added between August 10, 2021 and November 2, 2021 was 2,296.There were 495 removed Liq LPers between August 10, 2021 and November 2, 2021.An observed maximum Total Add Liquid LPers of 368 occurred on October 22, 2021 and a minimum Total Add Liquid LPers of 0 occurred on August 10, 2021.

The maximum Total Rem Liq LPers was 34 on November 1, 2021, and the minimum Total Rem Liq LPers was 1 on August 10, 2021.In October 22 and October 21, 2021, the total addition of liq LPers was higher than normal but lower than normal on November 2, 2021.For October 25, 2021, and November 2, 2021, the total rem Liq LPers are lower than normal. For October 29, 2021, the rem Liq LPers are higher than normal.

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