🪙Liquidity Pool Rewards

In Retro, a liquidity provider's income comes primarily from $oRETRO rewards. 82.5% of $RETRO emissions are allocated to liquidity providers, which is then split up and distributed by the results of the periodic veRETRO gauge voting. 15% of emissions are locked as veRETRO and added to existing veRETRO holders' veNFTs to mitigate dilution of their positions. 2.5% is sent to the protocol to use as necessary to drive protocol success.

Note: For users maintaining their own liquidity positions as opposed to depositing into an ALM, they are also entitled to 13% of the swap fees that their positions generate.

Liquidity APRs The calculation of the APR's range is determined by taking the price of the $RETRO token and the votes received by the liquidity pool.

Stabl Labs has recently updated their UI to present the most accurate real time APRs. While giving accurate APRs in v2-style pools is standard and to be expected, APRs in Concentrated Liquidity (CL) style pools with ALMs and manual positions is tricky.

In terms of distribution logic, CL is more complex: In traditional v2 pools every depositor has the same position and, consequently, everybody earns the same relative amount; in CL pools, however, positions vary wildly and depending on the range, positions with the same nominal value can make very different contributions to fee generation. The key word here is concentration. The more concentrated the position, the more it will be used in swaps and the more it will contribute to fee generation. Consequently, it has to earn a larger share of the rewards; it also takes a larger risk of being out of range.

This is where our partner Merkl comes in: it runs a distribution algorithm that makes sure everybody earns according to their fair share. One of the challenges that comes with this is that APRs are in constant flow: every price movement, deposit, or withdrawal changes the distribution of the rewards and consequently the rewards. Therefore, APRs have to be tracked in real time and on a case-to-case basis. Therefore, we have developed a set of characteristic APRs that will help the user to make informed and reliable decisions.

To help the user identify promising pools, the first quantity is the liveaverage APR. It is defined in the following way: it is the cumulative earning of all active positions at the given moment divided by their respective active TVL, projected to a year.

The above figure shows a liquidity profile of the Matic/USDC pool. To calculate the liveaverage APR, all the TVL of positions with liquidity in range are taken into account and averaged with their respective weight. Mathematically, the liveaverage APR is given by:

To put this into more graphical terms: this number tells the depositor what can be earned when depositing a set of positions with the exact same liquidity profile as the currently active one. While this gives good orientation, this is not very practical and most users want to only deposit one position.

In order to help with this, we define 3 different presets per trading pair that can be seen as tooltip options: narrow, balanced, and wide. They differ in their degree of concentration going from high to low and consequently the narrow position has the highest earning potential, see figure. This projected live APR requires the knowledge about concentration and individual value of the position, the token content as well as the Merkl parameters.

Usually, these numbers are higher, often much higher than the liveaverage APR. This allows the user to choose a width of a position that surpasses the average APR while still managing and controlling impermanent loss.

We believe that this is an important step towards allowing the user to make informed investment decisions with planable outcomes. Additionally, once the position is deposited, the user can directly check the APR of the specific position in real time.

In the next iteration we plan to allow for a simulation of the position giving a more accurate forecast of the APR that takes APR self-dilution into account.

Voter APRs On the Vote page, Current APR shows the APR the vault is generating in the current epoch, while Expected APR shows a prediction of what the APR will be in the next epoch based on the votes the gauge has received.