What is Liquidity Pool?

Liquidity Pools are a place to pool tokens (otherwise known as liquidity) so that users can use them to make trades in a decentralized and permissionless way. These pools are created by users and decentralized apps (or Dapps, for short) who want to profit from their usage. To pool liquidity, the amounts a user supplies must be equally divided between two coins: the primary token (sometimes called the quote token) and the base token (usually ETH or a stable coin).

SushiSwap's liquidity pools allow anyone to provide liquidity to them; when they do so, they will receive SLP tokens (SushiSwap Liquidity Provider tokens). If a user deposited $SUSHI and $ETH into a pool, they would receive SUSHI-ETH SLP tokens. These tokens represent a proportional share of the pooled assets, allowing a user to reclaim their funds at any point.

What is Yield farming?

Yield farming involves lending or staking cryptocurrency in exchange for interest and other rewards. Yield farmers measure their returns in terms of annual percentage yields (APY). While potentially profitable, yield farming is also incredibly risky.

Methodology

I used 0xd9e1ce17f2641f24ae83637ab66a2cca9c378b9f as SushiSwap: Router address for looking to LP providers.

I found top used origin_function_signature and figured out:

'0xe8e33700', '0xded9382a', -- add_liquidity
'0xf305d719' -- remove_liquidity

I used 0xef0881ec094552b2e128cf945ef17a6752b4ec5d as SushiSwap: MasterChef V2 address for looking to yield farmers.

I found top used origin_function_signature and figure out:

'0x8dbdbe6d', -- deposit
'0x0ad58d2f', '0xd1abb907' -- withdraw

I show in this dashboard:

• Total number of unique LP providers
• Total number of unique farmers
• The Ratio between Yield farmers vs. LP Providers
• Weekly unique LP providers
• Weekly unique farmers
• Compare daily number of unique LP providers/farmers and ratio between yield farmers and LP providers
• Distribution of number of LP positions opened by user.
• Top 10 wallets that opened most number of LP positions.
• The average number of LP positions opened by each unique wallet address.
• Compare total liquidity provided by protocols and retails
• The percentage (%) increase/decrease of unique LP providers/yield farmers.
• Correlation between profitability vs. length of time
• Correlation between profit vs. time of withdrawal
• Correlation between profitability vs type of pool

• The statistics show that the number of those who provided liquidity is much more than those who were yield farmers. We can almost say 6 times more.
• Another point is that almost the number of users of both groups, i.e. liquidity providers and yield farmers, has decreased over time. In the beginning, the number of those who provided liquidity was more than 6,000 per week, but now it has reached less than 1,000 people. This can also be said about the yield farmers, who have gone from 1,000 people to less than 150 people per week.
• The main reason for this happening is the market conditions and people's fear of holding their tokens. People's lack of trust in DeFi and successive hacks is another reason for decreasing welcoming people.

Number of unique wallets

These charts obtained by ethereum.core.ez_token_transfers table.

Number of LP open position

These charts obtained by ethereum.core.ez_token_transfers table.

Liquidity (Based on TVL) owned by the Protocol vs. Retail

In this part, I’m going to find the TVL of SushiSwap pools. To solve this part I was inspired by cryptoicicle’s query.

Let me give my definitions of protocol and retail in this question. According to my definition, protocols are other platforms that create liquidity in pools and retail are normal users. So I considered the addresses that have names in the label table as protocols.

The percentage (%) increase/decrease of unique wallets

Correlation between profitability vs. length of time

According to my definition, profit is remove liquidity - add liquidity for each user.

Correlation between profit vs. time of withdrawal

Correlation between profitability vs type of pool

I can see notable day in above charts, On Dec 26th, 2021 both number of unique LP providers and yield farmers increased.

LP providers from 638 reached to 905.

Yield farmers from 237 reached to 552 (more than 2 times in less than 1 day).

This chart shows how many of unique users only open one LP position on SushiSwap, how many 2 and etc.

As you can see, around 40% of people opened LP position only one time.

In my opinion, for a DeFi protocol, when 40% of users won't use it again is not a good sign. As explained above, users use pools to make trades in a decentralized and permission less way so enough liquidity of them is an important issue.

Here, I show top loyal users on SushiSwap who opened most number of LP positions. I called these users as loyal users.

The top three places belong to below addresses with 1231, 573, and 500 opened position so far respectively.

:1st_place_medal:0x1F14bE60172b40dAc0aD9cD72F6f0f2C245992e8

:2nd_place_medal:0x0202ed9ff0d505f9b064a610199a001cef9977bd

:3rd_place_medal:0x777999be819ffecee44a995560a9d0e97780a30c

The average number of LP position opened by LP users is 3.7 in past two years.

As I show in left chart, around 82% of SushiSwap users opened position less than 4 times.

Personally, I thought that this number would be much more than this simply because of the number of loyal users we have on this platform.

As you can see, more than 73% of all TVL pools in Sushi Swap have been provided by retail.

It is a good sign that most of the TVL was provided by normal users.

I can’t see balance between protocols TVL and retails TVL in pools.

These charts show the percentage changes in the number of unique LP providers and the number of unique yield farmers each month.

The decrease in the number of unique wallets is clearly visible in these two charts.

I checked whether the number of days a position is open is related to the profit or not. As you can see, most users faced losses. In the previous sections, I mentioned that the general market situation is not suitable for keeping tokens. This issue also applies to liquidity provision, yield farming and, staking.

According to these two charts, we can say that if we do not consider the holding time between 3 and 4 days, the more days a position is open, the more likely it is to lose.

I checked whether the time of withdrawal is related to the profit or not.

I don't see any particular correlation between the two metrics in these charts, all I can say is that the biggest profit was made on September 1, 2020.

Finally, I showed the profit achieved by each pool to see if there is a correlation between the type of pool and the amount of profit that is obtained.

I checked the address of the pools in Etherscan. It cannot be said that there is a correlation between the type of pool and the profit from it.

Conclusion

The important parts of the dashboard that caught my attention were first that the number of liquidity providers as well as yield farmers has decreased significantly over time and secondly that those who open position for a long time are usually at a loss.