Tldr: some data on DXdao LPing on Swapr and discussion on how future deposits into Swapr across Arbitrum, mainnet and xDai.
Swapr is live on mainnet and xDai with plans to soon launch on Arbitrum. DXdao has provided liquidity on both mainnet and xDai.
On mainnet, DXdao is currently provisioning $789k in the Dai-WETH pool and currently supplying $1.88m on xDai across the WETH-xDai, USDC-xDai, WETH-DPI and WETH-WBTC pairs. These were deposited in various stages over the last 3-4 months through proposals on mainnet and xDai.
This liquidity has been crucial at bootstrapping Swapr, but it’s also a significant amount of DXdao funds. I put together a spreadsheet to track their performance. DXdao funds earn trading fees on Swapr but are also susceptible to impermanent loss. So, I looked at each pair DXdao is providing liquidity on to determine whether DXdao would have been better off hodling or LPing on Swapr.
Some highlights below (on the extremely small sample size of the last few months):
All of the mainnet liquidity was provided before April 2nd, when ETH was at $2,175. DXdao was LPing while the price of ETH shot up to $4300 - selling ETH along the way - and has continued to LP while ETH has declined to under $2000 - buying ETH along the way. Annualized out, this would be close to a 7% APY, but market conditions could lead to more impermanent loss in the future.
The story is similar for the WETH-xDai pair on xDai, although the deposits came a little later than mainnet (and therefore at higher ETH prices). There was a small return for the USDC-xDai pool, which would annualize out to about 1.5%, but this pool also has no risk of impermanent loss.
LPing on the WETH-WBTC and WETH-DPI pools, however, was not profitable:
The negative return is because ETH performed better against DeFi Pulse Index and BTC over that time period. These are likely correlated pairs - all three assets go up in a bull market. LPing could be more profitable if there is more volume, and the launch of Swapr Beta and farming campaigns may do that.
In total, DXdao has been profitable as an LP on Swapr on xDai and mainnet
Swapr squad is building towards an Arbitrum launch and DXdao governance has already committed $2.25m in capital to be used by its base there. As the launch date approaches (wen….), DXdao should agree on a Swapr liquidity plan and pass a proposal to send the funds to aDXdao on Arbitrum One.
I also think this is an opportunity to deposit additional liquidity on xDai and mainnet - it supports Swapr and has proven to be profitable (in a small sample size). I’ve listed some polls below to gauge the community’s thoughts on next steps.
Here’s a proposed breakdown of the deposits across pairs and chains:
- WETH-xDai - $500,000
- WETH-Dai - $1,000,000
- WETH-Dai - $1,250,000
- USDC-Dai - $250,000
- WETH-WBTC - $250,000
- WETH-DPI - $250,000
This would be $3.5m in total and we’d have to discuss the source (ETH or stablecoins) and other logistics.
What do others think? Provide comments and feedback below