How to make money by providing liquidity on the Polars platform?

4 min readMay 21, 2021

Polars Pools Arrangement
The platform has 3 main liquidity pools: Base Pool, Liquid Pool and Trade Pool. Thanks to the unique pooling system, it is possible to maximize liquidity and collateralization of the polar WHITE and BLACK tokens, while providing exceptional security for liquidity providers.

The Base Pool is used to create the aggregate price of the WHITE and BLACK polar tokens. You simply add the underlying asset (USDC) to the Base Pool and BWT tokens (WHITE and BLACK aggregate price token) are automatically minted for this amount. Each BWT token is fully backed by the underlying asset in the Base Pool, so any user can return BWT tokens back to the underlying pool and return the underlying asset back in full.

Users put the tokens received in the Base Pool BWT into the Liquid Pool, thereby generating WHITE and BLACK tokens separately in the same amount. In return, the user receives a BWLT token (LP token), which reflects the user’s weight in the Liquid Pool. Thus, WHITE and BLACK tokens are born, which users can buy, sell and exchange using the underlying asset (USDC). As you can see, each polar WHITE and BLACK token is fully backed by BWT Cumulative Price Tokens, and BWT in turn is fully backed by the underlying asset in the Base Pool. This architecture makes the system as robust, secure and secure as possible.

Users can now buy polar WHITE and BLACK tokens and add them along with the underlying asset (USDC) to the Trade Pool as liquidity. The Trade Pool is a full fork of the Balancer pool. Therefore, it is structured similarly. The user adds liquidity to 3 tokens (WHITE, BLACK and USDC) and in return receives a PTPT token (LP token, which reflects the user’s weight in the Trade Pool). Users will now be able to exchange polar tokens in the Trade Pool using the liquidity of the liquidity providers.

How to earn?
You can supply liquidity to the Liquid Pool and Trade Pool and receive 50% of all commissions that users pay when swapping.

When users trade in pools, they pay 0.3% swap fee. 50% of these commissions remain in liquidity pools. Thanks to this, the weight of your LP token is constantly increasing. For example: you put 1000 BWT in the Liquid Pool for a month and received 1000 BWLT in return. In a month, when you return 1000 BWLT back, you will already receive 1100 BWT. You have earned 100 BWT which you can return to the Base Pool and receive more underlying asset (USDC) than you originally put there.

It’s the same with the Trade Pool. For example, you put 1000 WHITE, 1100 BLACK and 550 USDC. We got 100 PTPT in return. After a while, you return 100 PTPT back. But their weight has increased due to the commissions paid by users. You will now collect 1050 WHITE, 1200 BLACK and 600 USDC back. You have earned 50 WHITE, 100 BLACK and 50 USDC.

Provide liquidity to Polars liquidity pools and grow your capital with minimal risk (Trade Pool) or no risk at all (Liquid Pool). Read about the differences between Liquid Pool and Trade Pool in this article.

Additionally
As we discussed in the business model article, 20% of platform fees go to the Base Pool as collateral, which gradually increases the total value of the WHITE and BLACK polar tokens. This means that if you own BWT tokens, or WHITE and BLACK separately, you are constantly increasing your capital. For example, at the start, the aggregate price of WHITE and BLACK (BWT) tokens was 1 USDC. But after a while, thanks to 20% commissions, their price increased to 1.1 USDC. Your capital has increased by 10% and you will be able to return BWT with 10% more value than you originally paid.

How to make money by providing liquidity on the Polars platform?

Written by Polars.io