Liquidity Mining
What is liquidity mining?
Sumero's liquidity mining program will begin on launch day and will run until 28th November 2023.
The zClay bond component of the liquidity mining program will begin 1 month after Sumero launches so as to allow users to accumulate Clay before it begins.
As a DeFi participant, you may want to engage in liquidity provision on Sumero. This guide describes the liquidity provision incentivization scheme, also known as liquidity mining, at a high level.
Liquidity Mining
To kickstart the launch of Sumero, we offer an extra incentive to mint synths by rewarding those that offer exposure to DeFi users by pooling them against USDC.
Liquidity mining incentives are awarded only to liquidity providers (LP) that either stake their synthetic asset LP tokens on the Sumero protocol and/or lend Clay in return for zClay bonds. Rewards are distributed in proportion to both the amount of capital committed and the length of time it is committed. This process of incentivising early liquidity providers is known as liquidity mining.
Staking Liquidity Provider Tokens
Those seeking to earn Clay can buy or mint a cSynth and pool it with USDC and deposit the LP tokens in the respective staking pool. USDC must be used as collateral when minting synthetic assets. USDC carries low volatility risk and is far more suitable for minting assets in a cryptocurrency bear market. Once the user has minted an asset, they will need to provide liquidity to a liquidity pool along with USDC. You can purchase USDC on the Sumswap exchange or a centralised exchange.
When you fund a pool with USDC and a synthetic asset, you will receive LP tokens which represent your stake in the pool. You then need to stake these LP tokens in order to begin earning liquidity mining rewards. You will continue earning rewards provided your LP tokens remain staked. Those that provide liquidity for these synths will be rewarded in Clay.
If/When you want to stop providing liquidity, you can unstake your LP tokens, withdraw your liquidity from the pool, burn the synth, and reclaim your collateral by closing your position on the Mint page.
300m tokens will be mined this way which will be between 28% and 42% of the total Clay supply.
Synthetic Asset Staking Pools
1.8m - 2m Clay
48m Clay
zClay Bonds
478,796 Clay
50m Clay
Overview
Liquidity Provision: minting synthetic assets and funding liquidity pools for these assets in return for LP tokens.
Liquidity Mining Process: Deposit collateral (USDC) in order to mint a synthetic asset. Pool that synth with USDC in a 50/50 ratio and receive a liquidity provider (LP) token in return. Stake this LP token to earn liquidity mining rewards.
Risks Associated with liquidity provision: The price of the synth may rise relative to the collateral asset staked to such an extent some of the value of your position is liquidated. Movements in the relative price of assets in the pools can lead to impermanent loss.
Liquidity Mining Rewards: Receive a percentage of the Clay issuance allocated to this service. APY is dependent on the amount of competition in the market.
Eg: Deposit USDC and mint some synthetic asset tokens. Pool these synthetic asset tokens with USDC and receive an LP token representing your contribution to the pool. Stake this LP token and earn Clay for as long as it is staked.
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