RE: SPORTS Token Fund Proposal: SPORTS:HIVE Diesel Pool Liquidity Provider Rewards
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I just started messing around with the Diesel pools a little bit. I still don't quite understand them so much. I am trying to learn though.
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They are definitely an interesting tool! In case this helps you or someone else I figured I'd write a little about how they work here. What happens is that anyone with assets can agree to provide liquidity for these pools so that they can allow for more economic activity using the tokens they are pooling. When they provide liquidity they have to stake each side of the pool they are providing for.
Right now we just have a SPORTS / SWAP.HIVE pool so I'll use those two assets as my reference point but it'd be the same with any other grouping. If I want to provide liquidity I have to have the same amount of each asset. If I have 10,000 SPORTS, I will also need to have 0.8173 SWAP.HIVE to add liquidity.
Now that I've provided liquidity for it anyone else can now trade that position. Say you have 5,000 SPORTS, you could come to the swap side of things and trade your 5,000 SPORTS and get ~.4 SWAP.HIVE. This all happens without a third party so it enables trade even if Hive Engine exchange goes away because the trades are happening inside the pool.
Most pools charge a fee for swaps which is then distributed to the liquidity providers in terms of their pool liquidity %. Hive Engine doesn't actually charge any fees for swaps so they incentivize swaps by Liquidity Pool rewards such as this proposal. When a tribe has LP Rewards it will send an amount to that contract each day which then gets distributed across all the LP providers to reward them for locking up their assets so others could trade against.
Awesome! Thanks for the info. That does help quite a bit!