Bittawm's Intro to Liquidity "Mining." The new most profitable form of mining?

[bittawm]

I consider myself a veteran bitcointalk OG miner. I have conducted millions of dollars’ worth of group buys here on bitcointalk, owned my own large scale farms, I have had access the latest miners before they have hit the market, I have worked with power stations and some of the largest mining hardware manufacturers in the world.

Mining has been a big part of my cryptocurrency journey; I have been involved with mining in a big way. This brings me to my next point.

There is a new form of "mining" that has some great benefits over traditional Proof-of-Work mining. Most notably higher profitability. This new method is called Liquidity "Mining"
It's a big part of a recently booming segment in blockchain, DeFi, and I am here to share my knowledge and experience.






What is Liquidity "Mining"?
Generally, most Defi protocols earn revenue from 2 main sources:
Source 1: Trading fees – Some users will want to swap one token for another on a decentralized exchange protocol (e.g., UniSwap). The protocol takes a fee (~0.3%) but gives most of it (~0.25%) to users who loan tokens (i.e., provide liquidity) to the protocol, which is needed to enable trading.
Source 2: Borrow interest – Some users will want to borrow tokens on a borrow/lend protocol (e.g., Aave), generally to leverage up their trading positions. The protocol will charge borrowers an interest, keep some of the interest for themselves, but give most of it to users who loan tokens (i.e., provide liquidity) to the protocol, which is needed to enable the loans.

Liquidity mining = being a Liquidity Provider. This means holding tokens of projects you believe in and loaning it to various protocols to enable their function. In return, you earn some trading fees (Source 1) and borrow interest (Source 2). The kicker is these protocols often will give you additional token rewards (denominated in their tokens) to incentivize participation, which will boost the earned interest of your loaned tokens to pretty high values (20-100%). If you don’t believe in any project, you can also loan out stablecoins (e.g., USDT, USDC) and earn 5-20% interest on them.





Let’s take a look at some of the challenges traditional miners face:

- Hardware Cost:
PSU costs
Miner costs
Connection costs (switches and cables)
Racking
Transportation costs
Long-time miners will admit that would have had much greater returns if they just bought cryptocurrency and HODLd instead of buying hardware to mine with.

-Electricity Cost:
Miners are power hungry; they are expensive to run, even when sourcing a cheap power.

-Miners become obsolete:
Miners are not constant money printers, there becomes a time when the power cost exceeds mining rewards even in bull markets, this is because mining is an arms race and eventually a newer more efficient miner is created, rendering older miners obsolete.

-Heat / extraction expense:
Miners produce heat, this becomes an issue when you have multiple miners running at once. I have experienced timber warping as a result of too much heat. Miners have to invest in extraction to keep miners running at a healthy temperature, this adds to direct costs and on-going costs as you need to power your extraction solution.

-Miner housing and security:
Miners need to be housed and watched over, this adds yet again more expenses to an already expensive process.

-Miner maintenance and miner management:
Hashboards fail, stability issues, connection issues. One miner may be manageable but have you ever managed 100? 1000? you get to a point where they need full time maintenance / management.

-Setup time:
I remember when I got my first 100 miners; I was under-prepared and certainly underestimated the time / man power involved with setting up. This is often overlooked.

Scalability issues:
1 miner is easy to cope with, but how about 1,000,000 miners? Even with dedicated teams and farms I could consider this close to impossible.

Hardware Scammers and vapourware:
There are many hardware scammers. People impersonate manufacturer representatives and pop-up manufacturers that sell vapourware with no intention of producing any hardware.

Pre-Orders / delays:
Many hardware manufacturers fail to meet delivery dates, in some cases when buyers place orders miners are super-profitable but by the time the hardware is delivered profit is almost non-existent.

Mining difficulty increasing and manufacturers over producing:
Mining difficulty goes up in general meaning miner profitability goes down over time.
In some cases manufacturers produce so many miners that profitability absolutely crumbles. For example I remember when bitmain over-produced hundreds of thousands of Antminer D3s that were earning hundreds per day, by the time they got delivered users got unprofitable, unstable, shitty miners.






Now let’s take a look at some of the issues Liquidity miners face:

Rugpulls and unsafe platform operators:
Some platform operators are straight up thieves (much like hardware scammers). It is important to assess the risks involved with each platform.

Impermanent loss (also known as IL):
When providing liquidity. You often provide a pair of assets. As these assets diverge in price, they lose a bit of value compared to if you just held them alone. This is because the value balances of the assets in the pair need to remain 50:50, so if one of the assets decreases in price then a portion of the other paired asset will need to be sold to buy more of the lesser valued asset. However, this is usually offset by some juicy platform returns or by only providing one asset to "mine" with. Keep in mind that single assets will not produce as high returns as paired assets.

Capital:
It takes money to make money; you are literally making returns from your capital. The more capital you have, the greater the returns.





Benefits of using Defi platforms and Liquidity Mining over traditional Proof-of-Work mining:

Higher returns:
APRs can be crazy high, especially if you get in as soon as platforms open. (in some cases we are talking hundreds of % per year)

Considerably more scalable and manageable than mining:
With a $100 million investment, liquidity mining on Defi platforms is much more manageable as you can spread the capital across multiple platforms. Some platforms have billions of dollars of total value locked. I would hate to imagine the work involved with a $100 million dollar mining farm.

Significantly less costs:
No power cost, no hardware maintenance costs, no rent costs, no security costs, no heat extraction costs, no transport costs, no hardware costs, no setup costs.

It is possible to avoid impermanent loss:
If users choose "mine" or farm with a single asset then they will never suffer IL, however the rewards will be considerably lower than Liquidity mining with a pair of assets.[/size]





Now I am here to share my knowledge of what I have learnt so others can experience what I have experienced, I have been totally swayed from traditional mining and knowing what I know now.....I will not go back to PoW mining. I mean as a hobby mining can be fun but this Defi stuff is an absolutely incredible life changing opportunity.

I am going to keep this thread alive and share helpful information that can hopefully help you all some good returns. Keeping in mind this is not financial advice and I am not a financial adviser, remember to DO YOUR OWN RESEARCH and read up about risks involved. I will do my best to share safe farms with honest operators and answer any questions you have.

Most of these platforms communicate with Metamask wallet, the first step would be downloaded metamask and creating a metamask wallet and adding the network you want to farm / mine on.
By default the Ethereum network will be added but you will need to add other networks, some suggestions would be:
-BSC network (Binance Smart Chain)
-Matic network (polygon)
Keeping in mind there are many more networks.

STAY TUNED FOR SOME EXCITING OPPORTUNITIES!

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[bittawm]

How to create a metamask wallet

     A.     Download Metamask for Chrome on https://metamask.io/ (you need to be using Chrome or Brave browser)

     B.     Follow the instructions to create a wallet, create a password, and write down your Secret Backup Phrase.






How to add other chains to metamask: (BSC for example)

Follow instructions here: https://academy.binance.com/en/articles/connecting-metamask-to-binance-smart-chain

[bittawm]

Reserved

[bittawm]

Reserved

[philipma1957]

  I was asked via pm to look at this thread. It is the first thing I did as I just woke up 5 minutes ago.

My position on pos or pol mining has always been negative. I know the op a long time he has handled a lot of mining equipment for years. With good reviews and pretty honest.

So I am going to monitor the thread and watch it develop. Maybe he has an angle in POS/POL crypto that is good.

I will say this I am in the POW camp and I have stated many times that this is my position.

I am running BTC,LTC/DOGE,ETH gear. Asics and GPUS.  I would love to see if pos/pol can work. So I posted here as a skeptic that wants to believe.

[badbart]

I've used panckaeswaps farms and had decent luck.  But it seems like a lot of sketchy coins.  I understand the idea of a rug pull, but what happens when the coins fall by 50% will your yield fall by 50% and the value of your stake falls by 50%?  Bull market might be great but a bear market might not be so good?

[philipma1957]

Had breakfast 🍳 and coffee ☕️ so I have awakened.

I have a back story here goes I lived in New York City 🌆 I moved to The suburbs in New Jersey in 1992.

In 1996 I met a bank owner and his partners. I have hung out with them since then. I watched them turned a struggling two branch bank in to a successful 7 branch bank.
I saw the usa federal laws and regs plus the New Jersey laws they had to obey.

I also saw how banks get into trouble with shifting interest rates.

The pos/pol industry is in direct competition with banking.

Not many regs. My fears are if they do well various countries well make strict laws.

New York state made laws against running a NY based pool for pow mining ⛏.

I used to mine at BtcGuild they had to shut down because they were a usa company.

I simply see a lot of worldwide banking pushback against pos/pol.

But then again I thought ipads were a bad idea. I also thought smart phones were a bad idea.

[Truthchanter]

Bittawm is the man and one of the couple of guys that introduced DeFi and Yield Farming to me. Honestly I don't even like to mention it much because I like that it's still kind of underground and worry about its saturation. I definitely lost money at first because I didn't know what I was doing. There's different strategies you can take, some are higher risk higher reward. Sometimes it comes down to knowledge and experience, and sometimes it comes down to luck. I've probably said too much 

[bittawm]

I've used panckaeswaps farms and had decent luck.  But it seems like a lot of sketchy coins.  I understand the idea of a rug pull, but what happens when the coins fall by 50% will your yield fall by 50% and the value of your stake falls by 50%?  Bull market might be great but a bear market might not be so good?

Hi Bad Bart.

I am glad you bought this up.

I totally agree there are a lot of sketchy coins and platforms around. I am here to enlighten people about Trustworthy operators and strategies that that will bank you coin.

Let me explain, during a bear market Proof-of-work mining profitability usually drops significantly.

During a bear market you can adopt the following strategies to remain profitable wihen liquidity mining:


1. Liquidity mine with stablecoin pairs (this should eliminate IL or at the very least highly mitigate IL)


2. Liquidity mine with mirroring assets (renbtc/wbtc for example , once again highly mitigating IL)


3. use platforms that allow for leveraged liquidity mining, meaning you can short crypto assets during a bear market. (because the asset that you are borrowing becomes cheaper to pay back later)

Expanding on point 3:

I would suggest using Alpaca Finance (https://app.alpacafinance.org/). These guys have done an incredible job with their platform. (leveraged Liquidity Mining Platform)

-I consider their platform extremely safe (I have trusted their platform with over $100,000 of my own crypto)
-They have over $1 Billion in total value locked (not some small TVL platform)
-There has been no known bugs and they have never suffered an exploit.

I will be reviewing the alpaca finance platform soon, and here I will share some strategies to make some good returns

[bittawm]

Bittawm is the man and one of the couple of guys that introduced DeFi and Yield Farming to me. Honestly I don't even like to mention it much because I like that it's still kind of underground and worry about its saturation. I definitely lost money at first because I didn't know what I was doing. There's different strategies you can take, some are higher risk higher reward. Sometimes it comes down to knowledge and experience, and sometimes it comes down to luck. I've probably said too much 

sorry I am letting the cat out of the bag. the people need to know!!!!!!!!!

[bittawm]

 I was asked via pm to look at this thread. It is the first thing I did as I just woke up 5 minutes ago.

My position on pos or pol mining has always been negative. I know the op a long time he has handled a lot of mining equipment for years. With good reviews and pretty honest.

So I am going to monitor the thread and watch it develop. Maybe he has an angle in POS/POL crypto that is good.

I will say this I am in the POW camp and I have stated many times that this is my position.

I am running BTC,LTC/DOGE,ETH gear. Asics and GPUS.  I would love to see if pos/pol can work. So I posted here as a skeptic that wants to believe.

POW mining can be used in conjunction with liquidity mining, making your crypto assets mine after they have already been mined. compounding your already mined earnings.

[bittawm]

As promised.

Alpaca Finance Review: https://bitcointalk.org/index.php?topic=5350183.msg57502634#msg57502634



These guys have leveraged yield farming....pretty incredible stuff

[Bitstar_coin]

For some time now i have been really considering liquidity mining, i heard it is way more profitable than staking although i haven't dare to engage in any because am probably too scared to loss my funds in the process, and i have heard about the impermanent loss the op mentioned so am thinking wouldn't it be best to just stick to mining stablecoin that way the value of the asset won't reduce to result in an IL, am still contemplating and weighing the options if this is good idea over just buying and hold for who knows how long, to me i see this as a way to earn passive income.

[bittawm]

For some time now i have been really considering liquidity mining, i heard it is way more profitable than staking although i haven't dare to engage in any because am probably too scared to loss my funds in the process, and i have heard about the impermanent loss the op mentioned so am thinking wouldn't it be best to just stick to mining stablecoin that way the value of the asset won't reduce to result in an IL, am still contemplating and weighing the options if this is good idea over just buying and hold for who knows how long, to me i see this as a way to earn passive income.

yes stable coins are great.

Currently you can get over 20% using alpaca finance leveraged farming with stablecoins

Whether you have large or small capital, getting 23% APY on leveraged farming stablecoins is pretty profitable relative to real world money markets, government bonds, and AAA bonds. Leverage farming stablecoins (at max leverage levels) is safe. Essentially, you are just borrowing USDT/BUSD/TUSD from lenders and providing it as liquidity to DEX platforms. These lenders don't  farm on DEXes for various reasons (lazy, inconvenient, don't want exposure to other stablecoins, etc.). The 23% APY already factors in borrowing interests and is the net APY you are earning.

[bittawm]

Alpaca TVL is up to  $1.284 Billion.

my leveraged positions are up.

I am enjoying the current market pump

[adaseb]

I've used panckaeswaps farms and had decent luck.  But it seems like a lot of sketchy coins.  I understand the idea of a rug pull, but what happens when the coins fall by 50% will your yield fall by 50% and the value of your stake falls by 50%?  Bull market might be great but a bear market might not be so good?

The value of the coin falling is not the issue. There is something called Automated Market Making. Hence the reason why you need to deposit an equal value of coins for pairs. Such as $100 worth of ETH and $100 worth of USDT. So if the coin losses half its value you will just get more USDT in the end and are fully hedged. Because when someone sells ETH, there is more USDT in the pool so it evens out. Since market makers cannot add actual orders into the bid/ask because it would get way too expensive.

The issue here is impermanent loss, which is basically what happens if there are only say 100 ETHs in the pool and some whale comes and dumps >100 ETH, what will happen then is you will get a loss because there is no USDT in the pool to make it balanced. Hence why you shouldn't use very small pools.

Bull or bear doesn't matter. You just don't want massive volatility which will cause IL. I am new to this yield farming also.

[Bttzed03]

~ The kicker is these protocols often will give you additional token rewards (denominated in their tokens) to incentivize participation,

I've lost count of how much I've harvested so far but it's been pretty beneficial to me. A lot of the money I've been using for paying bills and investing in other coins/token comes from here.

Now let’s take a look at some of the issues Liquidity miners face:

Rugpulls and unsafe platform operators:
Some platform operators are straight up thieves (much like hardware scammers). It is important to assess the risks involved with each platform.

Gotta add security as part of the issue. I got some money on platforms that were exploited from flash loan attacks.

[bittawm]

~ The kicker is these protocols often will give you additional token rewards (denominated in their tokens) to incentivize participation,

I've lost count of how much I've harvested so far but it's been pretty beneficial to me. A lot of the money I've been using for paying bills and investing in other coins/token comes from here.

Now let’s take a look at some of the issues Liquidity miners face:

Rugpulls and unsafe platform operators:
Some platform operators are straight up thieves (much like hardware scammers). It is important to assess the risks involved with each platform.

Gotta add security as part of the issue. I got some money on platforms that were exploited from flash loan attacks.

totally on the same page.

I have made some crazy profits on some of these yield farms. Granted I lost money when I started because I did not know what I was doing

I consider alpaca finance one of the safest having so much locked in TVL and giving the opportunity to leverage farm with stablecoins

[bittawm]

First step is to create a metamask wallet, I have added the instructions to my first reserved post:

How to create a metamask wallet

     A.     Download Metamask for Chrome on https://metamask.io/ (you need to be using Chrome or Brave browser)

     B.     Follow the instructions to create a wallet, create a password, and write down your Secret Backup Phrase.

[bittawm]

Check out my ILV review:

https://bitcointalk.org/index.php?topic=5351507.msg57568637#msg57568637

ILV is a $1000 token. you heard it first!