Hi Guys, I’m new to liquidity mining and have been researching like mad but couldn’t find answers to these questions. I wonder if you could help me at all?
I am really struggling to figure out whether it is worth providing liquidity to Balancer, but I cannot find the answer. Obviously I understand the concept - you put the tokens in and they pay you some BAL. This is all good.
The thing I cannot figure out is the fact that the pairing of tokens go up and down as you leave the liquidity in the system. So you can take out different amounts of tokens - and this can lead to impermanent loss and taking out less than you put in.
Does anyone have any really simple explanations of how this might work in practice. I read the white paper with the DAI and ETH example and my head just gets scrambled when they start talking about increases in prices of one token vs another.
If I put in REN and renBTC, in what instances will I lose out over just HODLing it? What scenario would be favourable?
If I put in unequal amounts, eg: 5K of REN and 10K of renBTC, the pool automatically balances it out to make 7.5K of each token. I understand up to this point, but after this, I am lost.
Any help given would be gratefully received !!!
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