Liquidity pools are a core piece of DeFi infrastructure that allow users to easily trade tokens without using a centralized exchange or intermediary. Instead of using order books for liquidity, DEXs use liquidity pools. Liquidity pools are smart contracts that hold tokens for users to trade with; in the case of OETH, most liquidity pools use the OETH/ETH pair.
Origin Ether has deep liquidity across several liquidity pools, allowing traders to easily swap into and out of OETH. Users that provide liquidity to these pools are rewarded with trading fees, as well as staking rewards and incentives on certain pools delineated below.
Liquidity provision for Origin Ether (OETH) is a fairly straightforward process that is similar to providing liquidity with any other ERC-20 token. There are a few key considerations to keep in mind, however. One key distinction is liquidity provision for Wrapped Origin Ether (wOETH) vs. Origin Ether (OETH); wOETH will continue earning staking rewards by default, whereas smart contracts using OETH must opt into yield to earning staking rewards.
As OETH liquidity is paired with ETH, liquidity providers face minimal impermanent loss when providing liquidity. This is attractive for users who want to accumulate ETH without risking directional exposure to non-ETH pegged assets. Let’s delve into how to provide liquidity with OETH below.
The first step to provide liquidity on Origin Ether is to acquire both ETH and OETH (or wOETH). Since OETH liquidity pools are paired with ETH, you will need both tokens to provide liquidity. OETH is the primary token for liquidity provision on ETH mainnet, while wOETH is more commonly used on Arbitrum.
The Origin dapp lets you swap ETH for OETH, routing the transaction through whichever protocol offers the best conversion rate at the time of the swap.
Next, chose the network where you would like to provide liquidity. Origin Ether is currently supported on Ethereum mainnet and Arbitrum, with several liquidity pools supported between the two networks.
The primary liquidity pools on Ethereum mainnet are supported by Curve and Uniswap. Gyroscope is the primary liquidity pool for wOETH on Arbitrum, which routes liquidity to the wOETH/ETH Balancer Pool. Liquidity provision on Gyroscope is currently incentivized by Origin’s Arbitrum grant, allowing liquidity providers to earn bonus yield in the form of ARB tokens until August 2024.
Once you’ve selected your network and liquidity pool, it’s time to provide liquidity using your tokens. You’ll be prompted to enter the amount of liquidity you’d like to provide; once entered, you will need to sign approvals from your wallet to allow the DEX to access your tokens. Once approved, you will be prompted to sign a transaction to send your tokens to the liquidity pool.
Transactions typically take between 30 seconds and 2 minutes to finalize. Once finalized, you will be able to view your position under the liquidity tab on the dapp you chose to provide liquidity on. DEXs don’t employ lockup periods, so you may withdraw your tokens at any time.
Users that provide liquidity with OETH and wOETH are able to earn trading fees on their tokens while maintaining their ETH exposure on both sides of the token pair. Earnings are amplified by pools that use wOETH or opt into OETH yield, as liquidity providers on these pools earn both trading fees and staking rewards. Currently, the Gyroscope pool on Arbitrum offers the most attractive rates for wOETH liquidity provision.
Certain pools are further incentivized by rewards tokens, such as CRV and ARB. The OETH/ETH pool on Curve has incentives streamed to the pool each epoch, while the Gyroscope pool on Arbitrum will stream ARB rewards to users until August 2024.
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