Removing Liquidity
Taking back your LSUs
Last updated
Taking back your LSUs
Last updated
Liquidity can be removed from the LSU Pool page. Simply click the Remove Liquidity tab and select the desired amount of LSULP tokens to redeem: for your chosen LSU.
You can choose, via the dropdown, which LSU tokens you wish to receive when removing liquidity.
It is possible that there will be insufficient tokens of your desired LSU (including the original LSUs you deposited) and you may need to redeem partially in other LSU tokens. This could occur due to swapping and unstaking activities in the pool in the time since you originally provided liquidity.
Owners of LSULP tokens who do not have a credit receipt NFT (ie they did not originally deposit LSUs and received LSULPs indirectly) can still redeem for any LSU that has liquidity but will be subject to fees (see below).
It is possible when removing liquidity that there are insufficient LSU tokens of the type you originally deposited. In that case you will need to redeem, partially or in whole, in other LSU tokens.
If you are in possession of the credit receipt and there is sufficient liquidity in your original deposited LSUs, you can redeem for them at zero cost.
If you are either:
In possession of the credit receipt and want to redeem for a different LSU (or there is insufficient liquidity in the original LSU)
An owner of LSULP tokens but not a credit receipt holder, redeeming for LSUs
There will be a 0.07% fee charged on redeeming. This is consistent with the fee charged to move validators and the breakdown is the same:
0.05% switching fee which goes to the LSU Pool itself
0.01% protocol fee which goes to the FLOOP Treasury
0.01% reserve fee which accumulates and can be used in the future to remove bad LSUs from the pool
The next section has more detail on the credit receipt.
The concept of impermanent loss (IL) is typically brought up when considering liquidity provision (LP) on a DEX. In the classic example:
LP provides tokens A and B
There is a large subsequent move in the underlying price
LP removes liquidity - getting much more A than B (or vice versa) plus earned fee income
The LP may have been better off not providing liquidity at all
IL is an interplay between fee income earned from volume and volatility in a range versus the move in spot.
There is no Impermanent Loss for LSU Pool
For LSU Pool, you are staking a single LSU token type and you may possibly withdraw a different LSU.
Let's look at a simplified example:
We have 2 LPs - Alice and Bob - who have provided 10 XRD liquidity each to LSU Pool in LSU1 and LSU2 respectively.
Alice and Bob each own 50% of the LSULP tokens that are minted since they each own 50% of the pool.
Let's assume there are no other LPs or LSUs in the pool and that LSU1 underperforms (eg because of bad validator performance). Initially the LSU Pool looks like:
LSU1 price in XRD
LSU2 price in XRD
Pool holding LSU1
Pool holding LSU2
Pool value (XRD)
Initially
1.00
1.00
10
10
20.00
In this case, we jump forward 6 weeks in time and we see that LSU1 has been massively underperforming (in fact it is stuck at 1.00 since the validator was badly performing).
LSU1 price in XRD
LSU2 price in XRD
Pool holding LSU1
Pool holding LSU2
Pool value (XRD)
Initially
1.00
1.00
10
10
20.00
6 weeks later
1.00
1.01
10
10
20.10
The pool value is 20.10 XRD.
Alice removes her liquidity, choosing LSU2 rather than the original LSU1. She sends in her LSULP tokens and gets back 10.05 XRD worth of LSU2 ie 10.05 / 1.01 = 9.9505 LSU2.
Bob now owns 100% of the pool. Which looks like
LSU1 price in XRD
LSU2 price in XRD
Pool holding LSU1
Pool holding LSU2
Pool value (XRD)
6 weeks later
1.00
1.01
10
0.0495
10.05
If Bob removes his liquidity now, he gets 10.05 XRD of LSUs, just in a combination of both LSUs (10 of LSU1 and 0.0495 of LSU2). He can keep these or unstake for XRD in the usual manner.
There is no slippage or loss here.
Nuance around fees:
The above analysis ignores fees earned by the pool during the 6 weeks.
It also assumes that there was no pool management in the 6 weeks.
It also ignores the 0.07% fee that an LP will pay when unstaking for a different LSU. So Bob would have paid 0.07% for removing his liquidity (but the pool would have earned 0.05% switching fee from Alice unstaking for her different LSU). Fees were discussed above.
Further on non-performing LSUs:
As seen above, a non-performing LSU can apply a drag to the NAV of the pool (ie the LSULP/XRD rate). While a LSU price can never go down, too many non-performing LSUs in the pool could cause it to yield less than a typical validator.
For this reason, the LSU Pool eligibility is managed - as discussed here.
