Understanding Liquidity Mining

Who can receive liquidity mining rewards?

Liquidity Providers will receive LP tokens as they provide liquidity to Strike Token/USDC pools on Trader Joe. Each Strike Token/USDC pool will have a different LP Tokens associated with it that could not be combined together. One LP Token serves as a unit of account representing the contribution in the respective pool. As a result, the liquidity provider will receive the corresponding share of transaction fees AND additional liquidity mining rewards from the protocol as an incentive to help sustain a liquid market. Note that liquidity providers will already receive liquidity mining incentives upon providing liquidity, no additional staking is required.

How are rewards distributed among Strike Token/USDC pairs?

When considering the reward allocation for each Strike Token/USDC pair, the Risk Level is used as the main parameter for distribution calculation. Under normal circumstances when an asset price is higher than 1.275x of the chosen price floor or price ceiling (identified easily from the number in the Strike Token name itself, e.g. 2950 is the price floor for ETH-2950 Strike Token), a Strike Token with higher Risk Level (i.e.Liquidation Price/Market Price) will receive a larger reward allocation. The top 6 pools (3 from Long and 3 from Short) will be chosen for reward allocation.
The protocol will automatically adjust reward allocations based on the current available pools and asset oracle prices. This reward calculation method will be applied to all pools (both Long and Short Strike Token/USDC pairs).
For instance, when ETH price is at $4,000:
  • ETH-2950 will have the Risk Level of 88.5%
  • ETH-2700 will have the Risk Level of 81%
  • 4080-ETH will have the Risk Level of 85%
Therefore, providing liquidity to ETH-2950/USDC pool will gain the largest amount of rewards, and doing so to ETH-2700/USDC pool will gain the smallest amount of rewards.

How are rewards adjusted for the same Strike Token/USDC pair that varies in risk levels over time?

When Strike Token approaches liquidation, rewards will be adjusted down for that particular Strike Token/USDC pair to discourage users from being in a too risky position.
To help users manage their risks and maintain healthy positions as the price approaches liquidation price, the incentive of that particular liquidity pool will start to drop at 1.275x as followed:
  • For Short Strike Token, the asset price is higher than the price ceiling/1.275
  • For Long Strike Token, the asset price is lower than the price floor*1.275
The incentive will finally reach zero at 1.225x (NOTE: a Strike Token liquidation price is at 1.2x). Your positions that are no longer receiving any rewards will be shown in the Liquidity Providing Section on My page.
For example, ETH-3000 will be at liquidation risk when ETH price is $3,600 (= $3,000*1.2). The incentive for ETH-3000/USDC liquidity pool will:
  • begin to drop when ETH price is $3,825 (= $3,000*1.275).
  • be discounted by 50% when ETH price is $3,750 (= $3,000*1.25).
  • stop when ETH price hits $3,675 (= $3,000*1.225).

How to Provide Liquidity & Earn Liquidity Mining Incentives

To earn more yields on top of these Strike Tokens, you can provide them to a liquidity pool by following these steps:
  1. 1.
    Go to the Liquidity Providing section on the Market page
  2. 2.
    Choose an available pool that matches your Strike Tokens. All pools are for Strike Token/USDC pairs then click Providing Liquidity.
  3. 3.
    After clicking, the user will be navigated to Trader Joe to begin providing liquidity. All actions are completed on Trader Joe.
  4. 4.
    After completion, the active liquidity providing position with rewards accumulation will be shown on My Page under the Receiving Rewards section.

How to Withdraw Liquidity

Users can withdraw their liquidity by following these steps:
  1. 1.
    Go to the Liquidity Providing section on My Page.
  2. 2.
    By clicking the Withdraw button, you will be directed to Trader Joe where you can withdraw your liquidity and claim back your original Strike Token and USDC. All actions are completed on Trader Joe.

How to Claim Liquidity Mining Incentives

Users can claim their liquidity mining incentives by following these steps:
  1. 1.
    Visit the Liquidity Providing section on My Page.
  2. 2.
    The Reward section shows available token reward, claimable reward amount (i.e. rewards with complete processing period) and pending reward. Pending rewards are the sum of reward amount from ongoing incentive programs and reward under processing period.
  3. 3.
    Claim rewards by clicking the Claim Reward button.
Last modified 24d ago