Weighted-Average LP Duration
What is the average duration of liquidity held in each pool, weighted by the size of the LP?
Introduction
- In this dashboard, we will first examine the LP Period of each liquidity provider on Thorchain liquidity pools (in days) in a scatter plot.
- Following that, we will look at the average LP Period (in days) and the average LP Size (in USD) of each liquidity pool on Thorchain.
- Finally, we will look at the average duration of liquidity held in each pool, weighted by its average LP size.
Approach
- This dashboard on accounts for Thorchain addresses that are still actively providing liquidity as of May 1st 2022.
- The average duration of liquidity held in each pool, weighted by the average size of LP, is calculated by multiplying the average LP period of each liquidity pool (in days) by the average size of LP by pool (in USD).
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- The above scatter plot shows the LP period of each liquidity provider in each pool. (Each dot represents a liquidity provider.)
- We can see that the majority of liquidity providers' LP Periods in each pool range from around 0 day to 400 days.
- This is with the exception of some inactive pools of the BNB and ETH chains with very few liquidity providers, and Terra pools that have only been integrated in the last 50 days.
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- The average LP period (in days) and average LP size (in USD) of each Thorchain liquidity pool are shown above.
- ETH.DNA pool has the longest average LP period of 352 days on average, while ETH.WBTC pool has the highest average LP size of 479k USD on average.
Let's look at the Weighted-Average LP Duration of each pool, which is calculated by multiplying the average LP period of each liquidity pool (in days) by the average size of LP by pool (in USD)
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- The bar chart above shows the weighted-average LP Duration of each LP pool.
- As can be seen, the pool with the highest weighted-average LP Duration is ETH.WBTC, followed by ETH.USDC and ETH.ETH.
- There is a trend in which the pools with the highest weighted-average LP Duration pools are on the ETH chain.
- This is appropriate because the ETH chain has been integrated on Thorchain for a long time, since the inception of MCCN on 13th April 2021.
- In addition to that, because the ETH chain requires a higher gas fee for providing and removing liquidity, users tend to add a larger amount of liquidity to ETH chain liquidity pools to ensure that they can cover the cost of entering and exiting the liquidity pool.
Conclusion
- ETH.WBTC is the pool with the highest Weighted-Average LP Duration, this is followed by ETH.USDC pool and ETH.ETH pool.
- This is fitting since ETH chain has been integrated on Thorchain since the launch of Thorchain MCCN and its high gas fee for providing and removing liquidity encourages users to add a greater amount of liquidity to ETH liquidity pools.