Today we have launched three new liquidity mining campaigns on Loopring Exchange. In total, there are currently four campaigns. Four campaigns simultaneously will continue to be the cadence going forward, to ensure there are always several opportunities for liquidity providers to earn.
Liquidity mining on Loopring.io is the program of giving liquidity providers on the venue rewards for their service (adding liquidity to the orderbooks). This should not be confused with market making rebates, which also exist on our exchange. The difference is: liquidity mining rewards are earned by your liquidity (limit orders) just ‘being there’, resting on the orderbook; market making rebates are earned when someone actually fills (takes) your order. In that sense, the same maker order someone places on the venue can earn rewards in two ways: liquidity mining and maker rebates.
Liquidity mining campaigns on Loopring are for specific trading pairs, typically last 30 days each, and each campaign has its own spread requirement and associated reward pool (described by a dollar amount and reward token). Three campaigns just expired, so there are three new ones to announce today: ADX-USDT, NIOX-ETH, QCAD-USDT.
One was still in process, BZRX-ETH, making a total of four. We will maintain four liquidity mining campaigns simultaneously going forward, so there are always ways for Loopring liquidity providers to earn. In future, we may scale this up and offer it across many more pairs at once, and perhaps generalize the rewards with LRC.
The parameters of each campaign can always be seen in the liquidity mining dashboard displayed above. Rewards accrue according to hourly snapshots of the relevant orderbook, and are paid out in bulk on the 1st of every month (assuming the campaign is over, if not it rolls to subsequent month).
- ADX-USDT: 1% spread, 6000 USD reward pool, paid in ADX tokens.
- NIOX-ETH: 1% spread, 4000 USD reward pool, paid in NIOX tokens.
- QCAD-USDT: 0.5% spread, 1000 USD reward pool, paid in QCAD tokens.
- BZRX-ETH: 1% spread, 2000 USD reward pool, paid in vBZRX tokens.
While the spread requirement dictates which limit orders are included in the hourly snapshots for rewards, within that spread, rewards are earned proportional to order size, and order balance. For more details on those calculations, please see here and here.
The rewards accrue in USD terms, and at payout time, the miners’ rewards will be paid out in the equivalent amount of the reward token, given the price on that day.
A word on mining methods and tools
Given all the liquidity mining/yield farming that takes place on Ethereum these days, it’s worth noting that ours can be considered the ‘old school’ way. This is primarily a function of Loopring.io being a high-performance orderbook-based exchange: liquidity is not provided passively as is done on AMMs. On Loopring Exchange, truly, providing liquidity means a user running a trading bot, and actively providing bid-ask quotes on an orderbook. As the price moves, the bot adjusts, and orders are placed/cancelled very frequently (and for free). In this way, providing liquidity to Loopring is similar to providing liquidity to legacy financial exchanges, or to centralized crypto exchanges. And indeed, as an Ethereum zkRollup, trades do not cost gas, so even small trades can be profitable. Traditional trading strategies are possible and profitable on Loopring layer 2, which is not true of layer 1 DEXs.
Given the above, it’s clear that while all (even manual) order placement is automatically liquidity mining, the serious miners will do their digging with automated tools. Traders can build their own bots and plug into Loopring Exchange via API, or they can take advantage of the several tools already integrated into Loopring, and use/ build off that: Hummingbot connector, vnpy framework, and NIOX maker. Hummingbot and vnpy require some coding skill, NIOX is suitable to be used by non-coders.
Finally, it’s worth noting that while liquidity mining today is mainly for more advanced and active traders/bots, Loopring v3.6 (late Q4) will support AMM, and thus passive liquidity. Liquidity mining may then take on another form.
Loopring is a protocol for scalable, secure exchanges and payments on Ethereum using zkRollup. You can sign up for our Monthly Update, learn more at Loopring.org, or check out an exchange/payment app at Loopring.io.