Liquidity Provision in USC

Providing USC Liquidity

Real Rewards to USC/ETH LPs

Unlike traditional liquidity pools where incentives are generally paid out in governance tokens, Chi Protocol allows users to stake their USC/ETH LP tokens and earn native staked ETH rewards directly from the protocol’s reserves, in addition to the trading fees generated from trading volumes. This dual reward structure enhances the overall rewards for liquidity providers, offering both staked ETH rewards and trading fees.

USC/ETH LP Rewards

USC/ETH LP stakers are currently entitled to earn 5% of the total weETH and stETH rewards generated by the protocol's reserves. This allocation allows LP stakers to benefit directly from the yield generated by the protocol, enhancing their rewards alongside the trading fees earned from providing liquidity.

Rewards in stETH and weETH are distributed every block, and users must manually claim them to receive their earnings. This ensures that stakers can collect their rewards at their convenience.

Example

Suppose the protocol's reserves are worth $5 million, and the average annual yield of the protocol's LSTs and LRTs is 3%. This means the protocol is currently generating $150,000 in yearly rewards from the USC reserves. USC/ETH LP stakers are entitled to:

• $7,500 to USC/ETH LP Stakers (5% of $150,000)

By providing liquidity in USC/ETH, users benefit from the growth in the protocol's reserves. This strategy not only benefits from the increase in Total Value Locked (TVL) but also offers a sense of predictability and stability for users' positions within the protocol.

Note that USC/ETH LP stakers are also entitled to receive additional CHI rewards. This adds another layer of incentives, boosting the overall rewards for liquidity providers within the protocol.

USC/ETH LP Staking Rewards Distribution

Assuming that within a given timestamp, 1 stETH, 1 weETH, and 1 CHI are distributed, USC/ETH LP stakers would be entitled to a portion of these rewards based on their stake in the liquidity pool. Specifically:

USC/ETH LP Rewards Distribution

USC/ETH LP APR Calculation

Staked USC/ETH LP APR

Note that the current rewards are measured and distributed every second.

More on Sustainable Reward Sources More on APR Formulas