What's the difference between adding liquidity and staking?
So, what is the difference?
Quite a bit, actually! In order to best explain Staking vs Liquidity Provision, please read the below
Providing Liquidity in the Pools
Most users will understand the concept of providing Liquidity, and how users who perform Asset Swaps (i.e. sell BNB to buy SPARTA, and vice versa) results in small amounts of slippage. The ratio between the volume of BNB and SPARTA helps to set the price, which is balanced out by arbitrageurs, ensuring that the pools remain as close as possible to the current prices found on CoinGecko or in the biggest exchanges. After all, who wouldn't want to sell some SPARTA for BNB if the going rate was 10% less than on Binance?
When a user adds liquidity, they receive a portion of the LP Tokens equivalent to their percentage in the total pool. This is best explained again below.
  • User sends X BNB to the Liquidity Pool contract
  • User sends Y BNB to the Liquidity Pool contract
  • Liquidity Pool contracts confirm receipt, identifies the 'percentage' of the total that the user has staked, mints the equivalent percentage of LP Tokens based on the user's weight in the pool after deposit, and sends this to the User wallet.
Breakdown of the Liquidity Pools.
In the above image, the user wallet might have, say, 20,000 LP Tokens of a maximum supply of 100,000 LP Tokens. As the Max Supply is minted and burned, your percentage of the remaining pool will scale.
What to do with your LP Tokens?
LP Tokens, as a BEP20 asset, can be traded or sold if a market is available, however, the primary purposes for these LP tokens are threefold:
  • Ensure a user has a fixed percentage of ownership of the assets stored on the Pool Contract
    • Bonus: Pool Rewards from revenue (slip fees and dividends paid into the pools)
  • Governance weight in the DAO
    • Bonus: Involvement in the protocol's governance
  • Staking yield in the DAO
    • Bonus: SPARTA yield!
Only LP tokens can be staked in the DaoVault, which is a deliberate decision to ensure maximum liquidity is available for token swapping. More liquidity = lower slippage in token swaps = more incentive for users to utilise the Spartan Pools
Only synths can be staked in the SynthVault for a similar reason
Last modified 7mo ago
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