Which is better for your ONEUP: Staking or Liquidity Pools?
Can't decide if you should stake your ONEUP or provide liquidity to a pool? This post got you covered. In this post, we will be comparing the APR of these two options, and look at the advantages and disadvantages of each.
Let us start with Liquidity pool!
Liquidity pool (LP)
If you are not yet familiar with ONEUP liquidity pools, you can easily check these out here.
ONEUP Pools APR
As of writing, both ONEUP liquidity pools offer a triple-digit annual percentage rate (APR). The current Average APR for the pools are a whopping 349% and 353% for ONEUP:SPT and SWAP.HIVE:ONEUP, respectively. What an awesome potential return just by providing liquidity to this pool.
Before jumping in, it is important to understand first the advantages and disadvantages of adding in LPs.
EDIT: For more information and clarity regarding the ONEUP liquidity pool rewards, I highly recommend reading flauwy's comment below.
Advantages of LPs
- You can remove your tokens anytime you want.
- Unlike in staking where you have to wait for the unstaking process to finish, you can easily remove your provided liquidity anytime that you want and get your corresponding tokens.
- Little to no time commitment
- With liquidity pools, your share of rewards are automatically distributed to you on a daily basis. The only time that you need to spend time in LPs is at the initial stage. Other than that, no time investment is needed on a regular basis. This is great for those who don't have much time to spare for curating contents.
Disadvantages of LPs
- Currently has a lower APR compared to staking
- What? There is a higher APR than 349? and 352%? Well yes, staking APR is higher if you curate contents consistently. You can see this computation in the next section.
- Risk of impermanent loss
- Providing liquidity to LPs will expose you to the risk of impermanent loss, which is caused by larger changes in the token price compared to when you added them to the liquidity pool.
For better illustration, here is an example of an Impernanent Loss calculation with the current price of 1UP (Token A) and SPT (Token B) as the basis:
Of course the future prices in the calculation are arbitrary. Feel free to play with the figures in the link attached above.
- Your share of pool rewards fluctuate based on the amount of liquidity in the pool.
- Since the rewards are split among the liquidity providers, if the pool gets more liquidity, we can expect our own share of rewards to gradually decrease. This is assuming that we just maintain the initial share that we have.
For our next part, we have Staking ONEUP and curating ONEUP contents consistently.
For this illustration, we used a Staked ONEUP of 1,700 as our basis:
Note: The Daily curation reward indicated in the table pertains to the corresponding curation rewards for your upvotes that day. Note that you will not be able to get these rewards right away. The timing depends on the post payout.
For a 1,700 Staked ONEUP, you will be able to get a curation reward of ~17.69. This is assuming that you will maximize your Voting Mana everyday. If we get to do it consistently, this now gives us a whopping APR of 380%.
That's huge! But what are the advantages and disadvantages of Staking ONEUP?
Advantages of Staking
- Opportunity to reward great 1UP content with your own votes.
- I have always been a fan of rewarding quality posts in Hive. So this advantage is a huge plus for me. My vote might be a small incentive for the author, but it will still add up and hopefully motivate them to continue making great content that can help the 1UP community.
- Higher APR if you maximize your daily voting mana.
- Maximizing your daily voting mana means curating posts on a daily basis. In the illustration above, we opted to stop voting at 80% to have a full 100% voting mana after a day.
- No risk of ending up with less 1UP tokens unlike in liquidity pools.
- If you are extremely bullish on ONEUP and you don't need it liquid, it might be a better to idea to stake instead of adding to the LP. This way, you won't be exposed to the risk of ending up with less ONEUP once you remove your provided liquidity.
Disadvantages of Staking
- You would not be able to convert your staked ONEUP immediately should the need arise.
The entire unstaking process is done in a span of 1 month, with 25% of your processed tokens becoming liquid each week. This means that if you plan to unstake a 1,000 ONEUP, you will get 250 liquid ONEUP each week in a span of 4 weeks.
This is a major disadvantage if you plan to use your ONEUP tokens in the near future.
- Varied payout timing compared to LPs.
- Unlike liquidity pools that give a regular daily payout, curation rewards varies in timing. This might be an issue if you prefer to have an expected liquid ONEUP on a daily basis.
My game plan is to maintain my current exposure in the liquidity pool, and only add when my share in the pool is going below 1%. Other than that, all of the liquid tokens that I will get are Staked and used to vote for awesome ONEUP contents. Since I love reading posts about NFT games, I don't have a problem with curating contents on a regular basis.
I would adjust this strategy if I suddenly find out that the time commitment is quite difficult to maintain for me or the liquidity pool suddenly becomes much more attractive. Who knows, maybe we will eventually get a Daily Bonus reward in the ONEUP:SPT LP or another token that I love is added to the rewards pool? Until that time comes, I will continue to focus on increasing my Staked ONEUP.
There you have it! Thank you for reading this far. I hope you all enjoyed this post. Let me know in the comments section if there is anything that you'd like to add or discuss about staking and liquidity pools.
Screenshots from certain websites are noted within the post.
Cover photo made in Canva.