Adding liquidity pools to docs page

The Plaza
#1

Is there information somewhere about what liquidity pools are and how they work?

I know we have a liquidity pool page here on the main site, but I think a page that simply shows off interest rates can be off putting in the crypto-sphere considering the many scams.

I would like to put together a more comprehensive guide regarding liquidity pools on the docs page that we can point people to. Particularly regarding the trustless pool implementations and the software involved.

Unfortunately I have not followed the liquidity pool operations very closely. I’d be happy to work with those more knowledgeable in this space to create a page for the docs site.

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#2

I might have little answers, but some suggestions and ideas. :blush:

The pool names contain links to the pool information websites, which have a lot of information beyond interest rates :wink:
Linking a pool on nubits.com creates a barrier for people who want to scam (potential) liquidity providers as long as people who want to provide liquidity know to trust only pools linked on nubits.com

What Nu could/should offer is a general explanation about the currently two different types of pools: TLLP pools and NuLagoon.
The inner workings of the pools are no concern of Nu, are they?
Setup guides for how to get a TLLP bot running are part of the pool documentation at https://nupool.net/, http://nupond.net/ and http://cybnate.github.io/index-liquidbits.html.
http://nulagoon.com/ provides information how to participate as well.

It would be awesome (maybe even required in terms of trustworthiness) for Nu to host an offiical version of the TLLP bot.
That would effectively limit ways to scam people with fake TLLP pools to something close to impossible.

What might also be appropriate is linking to the most recent grant on which the pool operation is based on.

I think that a guide how to set up and maintain a TLLP server could help spawning more TLLP pools which would in terms of decentralization be nice.

#3

I think this is generally what I would like the page to be about. I know there’s two main types of pools, and each pool can differ greatly from each other. I think what is most important is to explain the concept and express that “this is possible, it works”.

I was hoping that the page could also have this effect as well.

I don’t think it would be good to delve into the details of each implementation. The pages that the maintainers of the pools have already do a great job of that. Though I do think a general overview would be of great benefit when we want to explain the concept to people.

It seems there is no existing resources to build off, so I’m guessing i’ll have to put together something from scratch.

#4

I can give you some input to start from, if you like, as I know both TLLP pools and NuLagoon from own experience.
I used NuLagoon only for a short time, because I found it less convenient to be able to withdraw the funds only once per week (at accounting day) , but that has changed to two times per week (now there’s two accounting days).
I might try NuLagoon soon again.
I’ve run bots on liquidbits, nupond and nupool (alphabetical order and not order of appearance) at different exchanges and pairs since then.
Or do you prefer gathering the information by yourself?

#5

Any information that you think would be helpful can be dumped in this thread. When I have some time next week i’m going to do a bit of research myself and come up with a draft page.

#6

Tllp currently is incompatible with multiple pools on one pair. This fundamentally limits how decentralized operator ship can be. I don’t necessarily think this is a terrible thing, as getting custodial grants passed is and should be a burden.

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#7

Ok then, here comes a story about Nu, the decentralized liquidity providing and the ways to do that.
I think it’s necessary for people to understand why Nu sponsors the liquidity providing.
This requires a quick overview of Finalized evolution of liquidity operations as well as a summary of Decentralized liquidity without counterparty risk not yet implemented as introduction.
After all it’s what might people confuse most: why the heck is Nu paying up to 10% compensation per month?
Nu is paying for keeping the peg intact which is of paramount importance for the success of NBT!

Liquidity providing is a rather complex process, requires a passed custodial grant to have an address for broadcasting liquidity information, etc. That inhibits easy access to the role as liquidity provider.

@creon (he might have left Nu, but he is to be credited for it) invented a simple and ingenious way to bypass that obstacle.
He created a client server architecture called “trusless liquidity pool” in which the server part is performed by a custodian and the client part is performed by people providing liquidity using bots.

For people familiar with mining PoW coins it might be compared with mining pools:
the money stays in the control of the bots (at least as long as the exchange doesn’t get hacked or disappears…) just as the hash rate stays in the control of the miner.
The server accumulates the liquidity provided by the bots and reports them as Tier1 liquidity just as the mining pool server accumulates the hash rate of the miners to solve blocks.

There are different TLLP for different tastes:

  • different exchanges might be perceived at different trust levels. Holding money (fiat or crypto coins) at an exchange is required to provide liquidity!
  • different trading pairs have different risks in terms of volatility and resulting hedging risks that need to be shouldered by the liquidity provider
  • NBT/USD no risk, because 1 NBT = 1 USD
  • NBT/(EUR | CNY | other fiat coming) little risk, depending on how much EUR/USD and CNY/USD fluctuate
  • NBT/BTC quite serious hedging risk

TLLP bots place orders at the order book and report this to the TLLP server.
TLLPs are designed to pay the liquidity providers each minute a small compensation that is derived from the monthly compensation.
TLLPs have an upper limit until which they compensate for providing liquidity. Liquidity in excess of that limit doesn’t get compensated.
There’s no minimum amount of money or minimum duration for providing liquidity this way.
TLLP are typically configured to automatically perform (daily) payouts of the compensation to the liquidity providers.
TLLP may have a minimum of compensation that needs to be reached before a payout happens.
You can try running a TLLP bot with a few NBT or a few mBTC.
Participating in a TLLP requires a constant internet connection and continuously running the TLLP bot (to place the orders and report it to the server). The TLLP bot is programmed in Python. Devices like RaspberryPi are an ideal match for running TLLP bots due to their little power consumption.

NuLagoon is a different animal than TLLPs.
It’s a classic custodial grant operation using NuBot operated by reputed Nu community member @henry.
Some of the benefits for NuLagoon participants in comparison to TLLPs are: no need to run a bot, no need to maintain the bot, no need to have a constant internet connection.
To make this possible NuLagoon receives deposits from people who want to provide liquidity. NuLagoon manages everything, places the orders and pays the rewards.
NuLagoon offers different pools with different risk profiles, e.g. Pool C is immune to BTC volatility. The “price” for that is a much lower compensation.

To participate in one of the pools NBT (minimum 1,000) or BTC (minimum 4) need to be deposited.
There are two accounting days each week at which deposits are credited and withdrawals from NuLagoon are processed.
The information about the pools provided by NuLagoon is comprehensive,

NuLagoon is very convenient for people who want to have it easy, who don’t like to maintain a TLLP bot.

TLLPs are great for people who want to keep the control over their funds.

Both types of pools share the risk of exchange defaults.

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#8

There are still exchanges supporting NBT which don’t have TLLP operation (SouthXchange, AllCoin, Alt.trade).
And some of the exchanges that already have TLLP operation might have pairs left, that could be used for liquidity providing.
There’s still room for more! :smile:

#9

My hope is that bringing more exposure to the existence of the software could inspire some to improve and remove limitations such as this one. But if nobody knows it exists, or what it is (i.e. - relatively safe, not a scam), then the potential lays closer to zero than not.

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#10

Thank you for the wealth of info. When I get a chance i’ll review this and work on a draft after I search some other sources.

#11

AllCoin didn’t had a publicly accessible API when TLLP was created. I’m not sure if it has now.

As far as I understood @woolly_sammoth, SouthXchange support is planned for NuBot.
The next TLLP milestone is the re-integration with NuBot, so TLLP will support everything that NuBot does.

I don’t know anything about alts.trade, sorry.

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#12

I’ve started working on this. This is just a quick draft. I’m going to continue working on it through the week. Thanks @masterOfDisaster for the info and links. I’ll try to fill out more soon.

https://github.com/NuNetwork/documentation/blob/liquidity-pools/_kb/liquidity-pools.md

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#13

I’ve created a PR to add this to the docs page and for discussion. I’ve not received any feedback regarding the content though. I’m hoping someone familiar with the pooling operations could give it a quick review and post some suggestions. Otherwise I think it’s worthwhile to merge in soon.

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#14

I’ll have a look at it - sorry for having overlooked the opportunity to provide you with feedback.

#15

Any chance we can use the language “trusted network liquidity pool” and “trusted operator liquidity pool” instead of managed and unmanaged?

#16

For reference to @Nagalim’s suggestion - this was a discussion/suggestion in a different thread:

The expression “unmanaged” (and “managed”) is better than “trustless liquidity pool” (which are not trustless - the trust in the exchange is required).
But I like the expressions coined by @Cybnate and @Nagalim even better.

The rest of the liquidity pool info page looks great - informative, precise, with background, references and easy to get it for people new to it (I hope).
The latter requires a test with someone not already familiar with it.

#17

Personally I don’t feel like those names are much of an improvement. I don’t really see how the word “trusted” helps to define the pools. Both try to play off the notion of trusted/trustless crypto systems needlessly. It doesn’t really help with the description at all, and through reading the rest of the document people will realize that you have choice of trusting someone to manage the funds for you, or to trust an exchange to hold the funds. It will be implied and doesn’t really need to be in the name. It just makes it sound more technical than it needs to be.

“trusted network liquidity pool” - does adding network to the name really help to clarify or describe the pool itself? I don’t think it does. Managed seems to concretely describe the type of fund it is, and is similar language used in existing financial nomenclature. “managed liquidity pool” to me is the most descriptive and easy to remember/understand.

for the “trusted operator liquidity pool” I would even change my existing wording to “automated liquidity pool”. The language is much simpler, descriptive. I don’t think operator adds anything to the name. You could very well say that the managed pool has an operator as well.

I think “managed liquidity pool” (MLP) and “automated liquidity pool” (ALP) are the most descriptive and simplified names for the two types of pools. Though I know there has been some existing discussion on this topic, and if you all disagree i’ll happily change them to whatever the general consensus is.

The idea is that this page is meant for total noobs, and it shouldn’t sound scarily technical, and should be easy to remember.

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#18

And for noobs the expressions “managed” and “unmanaged” are more helpful than expressions who make sense to those follow the pools and know them quite well.
…sometimes you get trapped in your own world :wink:

The info page is great! :thumbsup:

#19

right, inside the forum we know what a trustless-crypto-NBT-liquidity-pool-tier-widget-thing is because we discuss it on a regular basis, but for exposing new people to these ideas it’s better to simplify the language as much as possible. I think automated liquidity pool in place of the TLLP is much better than un-managed even. Though my names may not be popular either. I’ll leave this up for some further discussion.

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#20

Brilliant, like automated liquidity pool (ALP) over TLLP and TNLP. Does better say what it is in simple language. Will hire you for marketing :wink:

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