We’ve been thinking a lot about how we can improve the current liquidity providing experience, and what Liquidity v.2 on the pDEX could potentially look like. I’d love to have your input.
We currently have two options to provide liquidity.
1. Add - when you directly interact with the chain and contribute both sides of a pair.
2. Provide - when you contribute single currencies through a more complex flow.
Both options have their own pros and cons. In pDEX v.2, we hope to combine the best of both worlds.
Here, we’d see Add and Provide combined into one:
- Provide single-sided liquidity (as you currently do via Provide)
- Interact directly with the chain (as you do via Add)
Back in April - June, we ran a LP campaign that incentivized liquidity providers to provide both sides of a pair. Rewards were calculated according to total locked liquidity. The UX was difficult, the program was convoluted, and providers suffered from impermanent loss.
From July, Provide was launched, allowing providers to contribute single currencies to pDEX liquidity, with rewards calculated automatically based on the type and amount of coins provided. Users are guaranteed the full amount of their initial investment, and are protected against impermanent loss.
While Provide is for most people, an improvement over the original program, both initiatives are not sustainable forever and require continuous topping up of the rewards fund.
For liquidity providers, we are considering options in 2 broad directions:
Direction 1: Distribute liquidity rewards as a percentage of block rewards – for every block mined, a percentage will go directly to liquidity providers.
Direction 2: Create a dedicated pDEX token to be distributed among liquidity providers based on the duration and amount of funds contributed to the pools.
Which option is more attractive to you, and why?
pDEX currently does not have governance in-built.
Liquidity providers could determine trading fees for the pair they contribute. If a pDEX token is created, they could use it to participate in making decisions regarding pDEX infrastructure and governance.
Currently, the only way to access pDEX is from the Incognito app.
Work on the necessary infrastructure to allow any crypto wallet to integrate Incognito DEX.
As with everything we do, pDEX is a work in progress. Looking forward to hearing your thoughts!