Recent price movement in the Spartan Pools
The Spartan Community has recognised a large price increase of the $SPARTA token over the last 24–48 hours, which is fantastic for all current Holders and supporters of $SPARTA!
Here we will run through many of the impacts of this price change, and how Holders and future Holders could benefit from this volatility.
Before going any further — remember, your tokens are your responsibility. This is not financial advice, but a guided walk-through of how Spartan Protocol operates.
AMM Model
Let’s start at the beginning, which of course, is the Spartan Protocol Whitepaper.
Sounds good, but let’s step through this in practice, using the concept of a Pendulum.
Balance is Good
Each Liquidity Pool is made up of paired Assets: for example, at time of writing, the BNB-SPARTA Pool contains the below asset totals
- 7,831,997 SPARTA
- 59,164 WBNB
Pools, by their nature, are intended to always try to maintain a 50:50 value of the SPARTA and other Asset stored in the pools. This position is where the Protocol is designed to offer the lowest fees, and the least slippage costs.
Take the Red Line below — and the SPARTA-WBNB Pool as mentioned above. Where the value of each token is equal, the pendulum will be at rest.
“But the pendulum is not at rest!”
Yes, that’s correct! The image above is quite accurately representing the imbalance that appeared in the Pools in early February, where the value of SPARTA may have increased to $7.5M, while the value of WBNB remained at $5M.
Imbalance is Good
Let’s now take a look at the new Red Line above, and assume that the value of $SPARTA in the Liquidity Pool has jumped to $7.5M due to a price increase, while $WBNB has remained the same.
Several things happen:
Firstly, Divergence Loss (Impermanent Loss) may/will occur.
This is something not unique to Spartan Protocol — put simply, your position in the pool will change it’s ratio of $SPARTA and $WBNB, however this positional change will not be confirmed until you remove your Liquidity Tokens back into the two base assets.
This divergence will be realised as users perform arbitrage or swaps in the Pools, which leads onto the next thing that happens
Secondly, the AMM will encourage Arbitrage
The Natural State of each Liquidity Pool, as mentioned above, is a 50:50 ratio between the fiat value of each paired Asset with SPARTA.
An increase of the value ratio from 50:50 to 66:33 as per above is a pretty wild swing, in this case, there’s $2.5M difference in the value for a pool that was originally only $10M deep!
Spartan Protocol recognises that it needs to get this pool balanced, and encourages arbitrage by increasing the price of WBNB in this example significantly, to encourage more users to Swap WBNB to SPARTA at a premium. At some stages, the premium (before Fees and Slippage) was almost 75% cheaper!
Thirdly, the AMM will increase Slippage and Fees
Stability is the name of the game. While Spartan Protocol can definitely offer a discount and fantastic arbitrage opportunities in these situations, it is no good in the long-term for there to be large-scale swings in value, and pool depth is very important to our future plans.
To help stabilise this, while the value of a token may change significantly (for example, USDT was spotted at a value of $1.75 at stages within the past 48 hours), the associated Fees and Slippage will also change significantly in line. This helps to ensure that Liquidity Providers are compensated for maintaining their positions during the turbulence, as well as Pools users who are swapping at a large discount.
Fourthly, the Dividend Payments will increase as well.
Our Liquidity Providers are critical to our success, and our slip-based fees are also paired up with our slip-based Yield (Dividends) that are paid into the Liquidity Pools as a separate transaction on each swap.
Remembering that the value of $SPARTA went as high as $0.95 on the 7th, the value of these dividends in these four Pools is just over $100,000… not bad for 3 days work! At current pricing (February 10), the value of this SPARTA is $110,000. Not bad for three days LP, at that rate almost $13.5M would be paid to LP holders solely in Dividends, not including Slippage/Fees!
Finally, the Dividend Payments continue to both encourage Arbitrage and Swaps, to continue to attract more Liquidity Providers to the Protocol.
In the near future, we will publish more in-depth Dividend breakdowns for the first two months of Router V2, and we will also be launching the first iteration of our Positions page, so that users can manage their positional changes during the life of their Liquidity Provision.
Community Contribution
Spartan Protocol is at its core a community-driven and led project. In this vein, the more contributors the better. There is a great opportunity for community members to contribute by making LP reward analysis tools, etc.
If you have an idea, share it in the community channels.
Engage with the Community and Contributors
Where to find out about all the latest updates or suggest improvements — get involved.
- Github: https://github.com/spartan-protocol
- Medium: https://spartanprotocol.medium.com
- Twitter: https://twitter.com/spartanprotocol
- Telegram Community: https://t.me/spartanprotocolorg
- Telegram Announcements: https://t.me/spartanprotocolann
