Recently launched mega pools at Puzzle exchange have already proven the magic of numbers showing incredible digits APY for liquidity providers averaging 400% and sometimes peaking above the 1,500% mark. In this article, we’ll explain how mega pools work and what makes them special.
HOW IS IT POSSIBLE?
During the last week our team received the same question from users: how is 1500% APY still possible?
Usually DeFi services reach suvsh by liquidity mining, which involves the issuance of a new token and its distribution to investors. In contrast, the Puzzle Swap pool model allows you to have a high return cap while jumping the endless coin hit. The independence of investors vis-à-vis the symbolic price and emissions makes it a highly sustainable solution.
So what is it that drives profitability? First of all, the commissions. Liquidity providers are rewarded for every transaction and there are many of them. In the first three days of trading, the volume exceeded $ 500,000, and with an average liquidity of $ 200,000, we can clearly see that the liquidity is overused by 250%.
Such a high volume can be explained by the math behind mega pools, which favors arbitrageurs and traders. Consider the following example.
Trader Bob buys A token from a mega pool that also contains B, C, and USD tokens. This transaction not only changes the price of token A, but also affects tokens B and C. Thus, Bob creates a profitable opportunity for another trader.
A single trade can result in 3-5 more trades, which will increase the trading volume and hence the commissions of the liquidity providers.
It is also possible to add that the first pools launched on Puzzle Swap are so profitable due to the initially high return of the tokens. Most of them have an APY above 100% which benefits both liquidity providers as well as Puzzle Swap due to its monopoly position in the market when it comes to trading these tokens.
However, the high return is not the main advantage of mega pools. There is also a less obvious but integral benefit.
HIDDEN POWER OF MEGA POOLS
What could be more important than a 1500% APY you will tell me? And our answer is investment security. The mega pool model allows you to diversify your portfolio and mitigate its volatility at the same time.
So, by providing liquidity in mega pools on Puzzle Swap, you not only get returns on your investment, but you also get a new pool token guaranteed by all deposit assets.
There is a similar instrument in traditional finance called index – a security whose value is based on all the underlying assets.
Compared to traditional finance, Puzzle Swap also has its advantages! Following DeFi principles, the price of the mega pool index is determined algorithmically and does not depend on intermediaries who can manipulate it. The value of such an index is based solely on the value of the assets of the pool.
For example, there are 9 different types of tokens in the Farms 2 pool, with a total value of $ 112,500. These tokens are converted to 222 index tokens. The account in the screenshot above has 1.87 index token, which equals $ 947.
Currently, all index tokens are automatically put into play to earn APY in the pool. But imagine if those index tokens could be traded or just stored in your wallet – this is where all the fun will begin!