The TripleFi liquidity pool return includes 4 parts, which are trading fees, price spread, LP position profit and interest rate. The TripleFi Liquidity Pool return depends on the market movement which determines the trading activity. However we can estimate the overall return with a scientific approach.
TripleFi LP annual percentage rate (APR) will be about 34.905%. And here below is how we reach this conclusion. (The hypothetical values are provided by industry experts)
Average margin per user=1000 USD
User LT=5 months
Average account leverage=x5
Trading fee=0.06%
Monthly trading fee per user=0.06%, 0.045% goes to LP
Monthly trading frequency=20
Daily interest rate=0.1%* (great position amount- smaller position amount)/total position, 67.5% goes to LP
LP income based on traditional finance market:
Trading fee≈Spread≈Position gain
Therefore,
Monthly Trading fee gain from each user=0.06%*1000*5*20=60 USD
Overall gain from each user on average= 60*3*5=900 USD
Trading fee for smart contract=60*5*0.015%/0.06%=75 USD
LP gain from each user on average= 900–75=825 USD
LP monthly gain from each user=825/5=165 USD
The net position limit for LP (R value, used to control the risk exposure of LP)=40%
Initially Long/Short ratio=35:5
Overall position ratio/LP size=40%
Active trader has a position 60% of time.
LP monthly return (interest excluded)=165*(LP amount* 40%/(5000*60%))/LP amount=2.2%
Total interest return=LP amount*(40%*35/40)*0.1%*30/LP amount=1.05%
LP interest return=1.05%*67.5%=0.70875%
LP total monthly return=2.2%+0.70875%=2.90875%
LP year return=2.90875%*12=34.905%
This estimate is based on the initial status of the mining pool. When there are more traders, the long/short position will be more equal, therefore the total amount of position will be increased even with the R value remains the same. As a result, the LP return will go higher than the estimation here.
