THALES stakers are now able to provide liquidity to Thales AMM
Today, we are thrilled to share with you some pretty exciting news about opening up the Thales AMM for liquidity providing and the implementation of TIP-139, after the successful implementation of TIP-99 (opening up Overtime sports AMM for liquidity providing), as a way of accommodating bigger trades on Thales markets for UP and DOWN positions.
Right now, THALES stakers on both Optimism and Arbitrum can start depositing liquidity (in the form of sUSD or USDC stablecoins) on Thales AMM here.
We highly recommend you read the full blog post before jumping in, so you can better understand what providing liquidity to Thales AMM entails, how the mechanism works, and how you can calculate how much stablecoin collateral you are able to deposit.
Ready? Let’s go!
TIP-139 motivation and a brief explanation
Thales markets have been deployed on Optimism 16 months ago (yes, time flies!) and on Arbitrum for almost 8 months, driving a combined volume of almost 15 million USD over 60,000 trades supported.
Since its inception, Thales AMM has been fully seeded by Thales DAO treasury, and given its capital-efficient mechanism (that fully collateralizes every position taken on any given UP or DOWN positional market) it’s been able to facilitate 13.6+ million USD volume on Optimism and almost 1 million USD in volume on Arbitrum, reaching a PnL (at the moment of writing this post without counting any protocol fees) of more than 93,000 USD on Optimism and over 48,000 USD on Arbitrum.
You can check all these stats in Thales dune dashboards:
👉 Thales AMM on Optimism
👉 Thales AMM on Arbitrum
So, seeing the immense success that opening Overtime’s sports AMM for liquidity providing has had, TIP-139 was proposed and approved by the Thales Council.
The approval and implementation of this TIP allows the liquidity used by the Thales AMM to have a controlled and iterative expansion, open it up to those interested in participating, and at the same time allow bigger trades against the AMM on UP or DOWN markets with better quotes (less affected by position size) on both Optimism and Arbitrum.
What does it mean to provide liquidity to the Thales AMM?
Basically, participant funds (stablecoins, sUSD in the case of Optimism, and USDC in Arbitrum) deposited in the Thales AMM will be used as collateral for all positions bought on the Thales markets dapp through Thales’ AMM for that specific chain.
👉 You can provide liquidity to Thales AMM here
Liquidity is provided only for UP and DOWN markets. Ranged markets (IN or OUT) are not included in this release.Take into consideration that this deployment is decoupled in terms of staking allowance per chain:
If you stake THALES on Optimism you’ll be able to provide liquidity (in sUSD) on that chain, and if you stake THALES on Arbitrum you’ll be able to provide liquidity (in USDC) there.
There are 3 main things you should know about providing liquidity:
- Allowance based on the amount of THALES staked
- Weekly round-based system
- Deposit and withdrawal mechanics
We’ll go one by one.
Allowance based on THALES staked
Every THALES token staker will have a capped allowance on how much they can provide liquidity based on the amount of THALES tokens they are staking. The ratio between this allowance and the amount of THALES staked will be controlled by a variable calledstakedThalesMultiplier
This multiplier represents how much sUSD or USDC you are allowed to deposit into the AMM for each 1 THALES token staked.
The current stakedThalesMultiplier value (as per TIP-139) is0.2, meaning that you can deposit 1 sUSD (or USDC) per 5 THALES staked. More THALES can always be staked to increase one's sUSD or USDC deposit allowance respectively.
You are not able to unstake your THALES while you are providing liquidity into the Thales AMM. If you wish to unstake your THALES you have to withdraw funds from the Thales AMM first.
If you need a step-by-step guide on how to deposit or withdraw please check the documentation here.
Weekly round-based system
The Thales AMM works in 7-day rounds, so liquidity providing (and its performance) will also be calculated according to these rounds.
The deposited sUSD (or USDC in the case of Arbitrum) will be used to fully collateralize the Thales AMM on a weekly round basis. A single positional market can only belong to one round, which is defined based on the maturity date of the market (also known as the strike date).
When a round ends, the Thales AMM performance from all markets in that round is summed up, and allocated to all liquidity providers proportional to their share of the pool.
A pretty elegant solution, eh?
Deposit and Withdrawal mechanics
Participants can deposit at any time during any 7-day round.
The deposited funds will be utilized as collateral in the Thales AMM starting with the next round from the time of depositing.
Funds roll over to the next round automatically until a withdrawal is signaled. So, if you don’t want to stop providing liquidity you can leave your deposit inside the contract. No extra tasks are needed.
Participants can signal a withdrawal at any time during any round. Since TIP-136 was approved, partial withdrawals are allowed with a minimum of 10% of the deposit to be withdrawn (meaning that you don’t need to withdraw your full deposit if you don’t want to).
The funds that are signaled for withdrawal will be unlocked at the start of the next round from the time of signaling.
It’s important to note that initially the maximum amount to be deposited into the Thales AMM, as per TIP-99, is 200,000 sUSD on Optimism, 200,000 USDC on Arbitrum, and a maximum of 100 users allowed per chain. The minimum amount to be deposited is 50 sUSD or USDC, respectively. These numbers were chosen as a first step in allowing expanded liquidity and will be iteratively raised depending on AMM performance by the Thales DAO governance.
Providing liquidity exposes you to various risks including potential losses due to users winning against Thales AMM on any given round, as well as smart contract security risks. Also please be aware that the past performance of the AMM cannot predict future performance. Please make sure you understand these risks before depositing.
Time for an example
So, do you need an example of how depositing into a Round works? Let’s get it!
We’ll use the basis of the same example presented on TIP-139 and TIP-99:
- Participants deposit 100,000 sUSD for Round 1 on Optimism and then the round is started.
- Round 1 starts on the 9th of May with 100,000 sUSD. If you provided 1000 sUSD your share is equal to 1% of the deposits.
- Round 2 receives $20k of new deposits (while Round 1 is ongoing).
- Round 1 ends with a total of 110,000 sUSD in the AMM. Your balance is now 1,100 sUSD entering Round 2.
- The total in Round 2 at the start (one week after Round 1 started, March 21st in this example) is 130,000 sUSD. Your share now is 1100*100/130000 = 0.84615% of the deposits.
- During Round 2 a trade is made on a market that belongs to Round 3 for an amount of 100 sUSD.
- The
defaultLiquidityProvider(all participant’s deposits) seeds the 100 sUSD and thus becomes a depositor for Round 3. - Let’s assume Round 2 had 0 PnL so the whole 130,000 sUSD is carried over. The total deposited into Round 3 when it starts is now 130,100 sUSD and your share is 1100*100/130100 = 0.8455% of the deposits.
Clear enough? If not, we highly suggest you read the documentation for a more comprehensive review. We’ll also be more than happy to answer your questions in Thales Discord.
Closing thoughts and what’s on the horizon
With this release, THALES stakers now have more options to deposit stablecoin collateral into one of the AMMs, be it Overtime’s sports AMM or Thales AMM.
And as a hint of what comes next, we can tell you that work for opening up the Parlay AMM (responsible for collateralizing all Parlay tickets on Overtime dapp) is already underway. We can’t give an exact date for this to be released, but we’ll make sure to announce it when it’s ready 💪
We wanna remind you that providing liquidity exposes you to various risks including potential losses due to users winning against Thales AMM on any given round, as well as smart contract security risks. Also please be aware that the past performance of the AMM cannot predict future performance. Please make sure you understand these risks before depositing.
Thales protocol (and the products built on top, like Overtime) keep evolving and pioneering decentralized solutions to bring the benefits of open finance (and open markets) to everyone who needs it around the world.
We would be happy to answer any questions, doubts, or feedback/comments in the Thales Discord.
Relevant links:
👉 Thales AMM liquidity providing documentation
👉 Thales AMM liquidity-providing page (Optimism and Arbitrum)
