Thanks for the tremendous interest people have shown in CaviarNine Babylon products. The LSU Pool product is obviously a hot topic, especially after Mattia’s excellent post.
Firstly, please check out the docs : https://docs.caviarnine.com/products-floop/lsu-pool/lsu-pool-overview
Secondly, please join our TG where you can field any questions : https://t.me/caviarxrd
Thirdly, we’ll be adding a bunch of Q&As to the docs this weekend.
Fourthly, did we mention checking the docs?
To answer some of the points Kevin raised:
- You add LSUs (with a value in XRD) to the Pool (valued in XRD)
- You receive minted LSULPs reflecting your % ownership of the Pool (from XRD amounts in 1)
- Economic activity happens in the Pool (swapping)
- LSUs in the Pool go up in value (in the usual way, based on Validator performance)
- You remove liquidity (send back your LSULPs)
- You receive LSUs of a given XRD value reflecting the Pool XRD value and your share of the Pool
Adding liquidity is free.
When you add liquidity (ie send in some LSUs), you are sending in an equivalent XRD value at that instant (number of LSUs you send * price of LSU in XRD).
Also at that instant, the LSU Pool has an equivalent XRD value (sum of : LSUs in Pool * prices of LSUs).
So the Pool mints you LSULP tokens equivalent to your share of the new Pool value:
if the Pool was worth 900 XRD (from various LSUs) and you added 100 XRD worth of LSUs, you now own 10% of the Pool (the Pool is now worth 1000 XRD)
If there were 900 LSULP tokens in circulation, then the Pool mints 100 and sends them to you (you now own 10% of circulating LSULP).
In the interim, the value of the Pool (and LSULP token) increases for several reasons:
- Increase in value of the LSUs themselves from validator yield
- Swap fees in the Pool when someone does an instant switch between validators
- Some secondary swapping fee income from arbers buying cheap LSULP after Instant Unstaking
In this example you owned 10% of the Pool (and first let’s ignore new liquidity added)
So when you remove liquidity, you can take out 10% of the XRD value of the Pool.
So if the Pool value is now 1020 XRD, you get back 102 XRD worth of LSUs.
If there is enough LSU that you originally provided, you can take all 102 XRD in that LSU (for no fee).
If there is not enough LSU (from swapping or other LPs removing) you will take back some (or all) in other LSUs eg LSU2 or LSU3. There is a small charge for the piece which is swapped.
BUT you still get back 102 XRD of value at that instant.
You could immediately unstake those LSUs for 102 XRD with the dashboard (or directly on CaviarNine).
So you may get back a different LSU. But there’s no ‘loss’ there in XRD terms.
More on APY
Now, if there were NO swapping going on then the Pool would just yield the same as the underlying LSUs it holds.
If the Pool was full of low yielding LSUs (eg high fee validators or validators missing proposals) then the APY would be low versus holding an LSU from a top validator.
The APY can never be negative! LSUs can not go down in price (there is no slashing on Radix).
CaviarNine (and later the FLOOP DAO) can curate the Pool.
This means we can make certain LSUs ineligible for the Pool - those with high fees or missing proposals (see the check marks on the Validator tab).
We also accrue a reserve to enable us to switch out and unstake underperforming LSUs (eg we just did recently with RadCrew).
Smart contract stuff
There are potential risks with any smart contracts - staking, DEXs, lending protocols, NFTs, Radix native blueprints etc.
LSU Pool has been audited by Sec3 (see the docs)
CaviarNine founders are fully doxxed and not anonymous.
Probably written too much on some stuff and not enough on others. Please read the docs (we’ll be adding more this weekend) and join our Telegram!