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Liquidity Provider of Hipo Protocol
Hipo Liquidity Providers (LPs) are essential participants, they enable adequate market depth and liquidity to accomplish bond trading. LPs could provide liquidity to any pool ( ie. 15days ETH Bond Pool ) they earn a portion of the pool’s trading fees and bond issuing fees in proportion to the amount of liquidity they provide.
There are two liquidity pools, one is interest pricing pool and the other is lending pool. The interest pricing pool gathers tokens in smart contract. Users first need to trade against the interest pricing pool to get their INTToken priced, and know how much interest they need to pay or could receive. And then they can trade against the lending pool to borrow or lend the assets.
Anyone wants to add liquidity to Hipo needs to add liquidity to both the interest pricing pool and the lending pool.
Hipo LP adds INTToken to interest pricing pool, the number of which can be calculated with the following formula:
——Quantity of assets added to Interest Pricing Pool
——Quantity of interest token should be added
——Quantity of Bonds to add liquidity
——Price of Interest Token in Bond Market
At the same time, Hipo LP deposits crypto assets to lending pool, which quantity can be calculated with the following formula:
——Quantity of assets added to lending pool
After LP adds liquidity to both of the pools, the protocol would mint Hipo LP Tokens and return them to LP’s wallet.
Hipo LP Tokens can be redeemed for their underlying crypto assets at any time. Hipo LPs have to settle their INTToken position first.
At withdraw, if the the number of INTToken hold by LP is more than the number added at beginning, LP need to sell the incremental units through the interest pricing pool. If the number of INTToken hold by LP is less than the number added at beginning, LP should buy back the units through the interest pricing pool.
Hipo LPs could earn a portion of transaction fees in proportion to the amount of liquidity they provide. There are two parts, trading fees of interest pool and trading fees of lending pool.
——Trading fees of interest pool
——Trading fees of lending pool
——Ratio of trading fee in lending pool, from 0.01% to 0.2%
——Liquidity Provider's earnings