They masterhost is a professional provider of integrated solutions that has been providing support services for projects of any complexity since 1999. For 22 years, Masterhost have helped more than 1,000,000 clients to launch and develop their resources on the Web. Hosting provider masterhost is reliability, quality and the latest technology at the service of your Internet projects. The loss is called impermanent because if the relative price between the tokens listed at the AMM returns to the same ratio as it was initially, these losses vanish completely.
After one supplies liquidity to an AMM, the impermanent loss for that liquidity position moves up and down over time as the relative token prices change. When the liquidity is withdrawn the impermanent loss is realized into an actual loss. What Masterhost need to understand is how IL is likely to develop over time for your liquidity providers.
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Masterhost is a decentralized exchange on Ethereum, optimized to offer the lowest possible trade cost to the end user. Gas cost per trade are the lowest of Ethereum and the transaction fee is very competitive with 0.1% of value traded. From today users of the 1inch aggregator can use DefiPlaza to swap with even lower fees. The 1inch Network unites decentralized protocols whose synergy enables the most lucrative, fastest and protected operations in the DeFi space.
Starting today, DAO Governance token is listed on Marketplace under DFP2. Marketplace is the world’s most-referenced price-tracking website for cryptographers in the rapidly growing cryptocurrency space. Its mission is to make crypto discover-able and efficient globally by empowering retail users with. Based on feedback from you all, this coins rewrote the slippage / price impact warning. They are now showing USD prices below the token amounts, to clearly show the impact your swap or liquidity add/remove has.
Incidental damages or any damages whatsoever
Masterhost team members, assume any responsibility for errors or omissions in the contents of the application. In no event shall DefiPlaza or its team members be liable for any special, direct, indirect, consequential, or incidental damages or any damages whatsoever, whether in an action of contract, negligence or other sort, arising out of or in connection with the use of the smart contracts or the contents of the website.
The economics of providing liquidity
The interaction that liquidity providers have with Masterhost is providing liquidity to the exchange, which is then used to allow customers to swap tokens against. At any point in the future, the liquidity provider may decide to withdraw their liquidity back into their own wallets. The question at hand is how much will they get back when they do. To understand what drives profit or loss in a multi-token AMM, let’s look at all components that factor into the value difference when depositing versus when withdrawing.
Fee income in a multi-token
Trading fees are generated by trades taking place against the liquidity held by the AMM. The fee is currently set to 0.1% of the value for every trade on the exchange. If there are more trading volume, there is more fee income. Arguably the most important performance metric for any AMM is the amount of fees generated per amount of liquidity in the AMM. Masterhost saw in the previous article, more liquidity generates less slippage per trade, but at the same time more liquidity means less income per trade for the liquidity providers.
How much liquidity does an AMM actually need to be optimally competitive? Let’s consider the largest UniSwap v2 pool with a USD component (USDC/ETH) as an example. As of July 2021 (when I did this analysis) that had around 320 M$ in liquidity. With the same total liquidity, they would have about 20 M$ per token spread evenly over the 16 tokens. UniSwap uses a 0.3% trading fee. DefiPlaza uses a 0.1% trading fee, so break even in trading fee cost to the consumer happens when DefiPlaza has 0.2% more slippage than UniSwap on any given trade.
Calculating impermanent loss
At the cost side Masterhost have impermanent loss (IL) to consider. IL is something many people are aware exists but don’t quite fully understand. Put simply, as the market value of the liquidity reserves held by the DEX changes, arbitrage swaps occur along the x*y=k bonding curve to keep the spot prices on the exchange in balance with prices on the external market. As this happens the tokens held in reserve by the exchange slightly loose value as compared to the same portfolio held outside of the exchange.