Mining FAQ

Mining

Q: I have USDC in my Arbitrum address, but the Pools page shows my wallet balance of USDC is 0. Why?

A: There are two versions of USDC on Arbitrum (and some other blockchains), native USDC and USDC.e. Deri V4 supports the former. So, if you have USDC.e, instead of native USDC, in your wallet, it won’t be recognized by Deri V4 website. You need to Swap USDC.e to native USDC (e.g. on Uniswap) in order to stake into Deri.

Please read this document for more details about native USDC vs USDC.e

Why is there an additional ETH payment in addition to the regular gas fee?

TLDR: The additional part is the pre-paid gas fee for the subsequent step(s). This is because certain operations aren’t completed within the single user-initiated transaction. It’s akin to when you bridge tokens from Ethereum to a Layer 2 (e.g. Linea): you pay the standard gas fee on Ethereum, plus an additional “pre-paid” gas fee, which covers the bridge operation’s cost to complete the subsequent step on Linea for you.

Details:

As an xDapp, Deri V4 splits an operation (e.g., trade, add/remove margin, add/remove liquidity) into several steps executed on different blockchains.

For instance, consider an “Add Liquidity” action initiated on Linea (the iChain), which involves three steps:

1. LP calls requestAddLiquidity on Linea.

2. Executor calls executeAddLiquidity on Deri Chain.

3. Executor calls finishAddLiquidity on Linea.

In step 1, the LP pays the regular gas fee for calling requestAddLiquidity and a prepaid gas for the executor to perform steps 2 and 3.

Prepaid gas = dChain Fee + iChain Fee,

where dChain Fee covers step 2, and iChain Fee covers step 3.

Given that step 2 occurs on L3, the dChain Fee is minimal, currently set at 0.00025ETH (higher on Linea due to its higher gas cost), and will be further reduced as we refine our architecture.

The iChain Fee is equivalent to the gas fee for calling finishAddLiquidity and varies based on the specific iChain.

Another instance, consider a “Trade” action initiated on Linea (the iChain), which involves two steps:

1. Trader calls requestTrade on Linea.

2. Executor calls executeTrade on Deri Chain.

Here is the detailed breakdown of Prepaid gas in ETH for each step. Please note that these figures are based on the actual gas costs across different networks and will be dynamically updated to reflect real-time network conditions.

Step	Arbitrum	zkSync Era	Linea	Scroll	Polygon zkEVM	Manta
Add Liquidity	0.000109650232	0.00012064345	0.00012364822	0.00065974594	0.00045773479498628	0.00016229668
RemoveLiquidity	0.000139243414597	0.00012510142	0.00020119114	0.00091474552	0.00055887436	0.000462034787018205
AddMargin	0	0	0	0	0	0
RemoveMargin	0.000105963904	0.00011450449	0.00020308186	0.00086763208	0.00040942324	0.0002050594
Trade	0.0001	0.0001	0.0001	0.0001	0.0001	0.0001
TradeAndRemoveMargin(Lite Mode)	0.000105963904	0.00011450449	0.00020308186	0.00086763208	0.00040942324	0.0002050594

Q: Does that mean I need to pay three times the regular gas fee?

No, you are paying less.

Deri V4 merely breaks down the procedure into three parts executed on different blockchains. This approach causes almost zero additional cost compared to a scenario where the entire procedure is consolidated into one function call and completed in a single transaction on one blockchain. In the one-chain-one-transaction setup, you are still paying gas to finish all the procedures of the three steps, and your cost for step 2 would likely be much higher as it would be processed on iChain.

Therefore, by executing a considerable portion of the process on Deri Chain (an extremely cost-effective L3), the overall gas cost is actually reduced.

How is the APY of AMM Liquidity Mining calculated & how can I verify it?

There are three fundamental factors that influence the displayed APY of a AMM mining pool. These are:

1. Both a rising and dropping value of DERI against USD, influence the displayed APY

2. The APY is generally dynamic, fundamentally influenced by how popular the pool is, the APY increases when liquidity decreases and decreases when liquidity increases.

3. Mining on Deri Protocol is based on the S2F principle (similar to Bitcoin), the number of total DERI's mined per week is decreasing over time. Please note that the mining phase is going to take decades! For more information kindly check out our Tokenomics article

The APY of liquidity mining only includes the yield of DERI award, whereas the profit of the base token is not included. To verify the displayed APY of liquidity mining for a certain pool, you can refer to the following formula:

1. At t0, record "My Harvest in Current Epoch" as H0;

2. At t1, record "My Harvest in Current Epoch" as H1;

3. Calculate $APY=\frac{P_{DERI}(H_1-H_0)Y}{(t_1-t_0)L}$ , where $P_{DERI}$ is the price of DERI, Y is one year's time, L is your liquidity contribution.

Please wait to have (t1-t0) long enough (e.g. 30 min) so that the estimation is close.

Is DEX Liquidity Mining risk-free?

No, it is not. Liquidity mining on Uniswap are subject to the risk of impermanent loss. Any resulting permanent loss caused by removing the liquidity is in the user's responsibility. Use only the listed pools on our website to add liquidity. Adding liquidity on empty pools directly over Uniswap can cause a huge or total loss. Any resulting permanent loss caused by removing the liquidity is in the user's responsibility

Is the AMM Liquidity Mining on Deri pools risk-free?

No, it isn't. In general, it is essential to comprehend that liquidity providers are the counterparts of traders on Deri Protocol. When traders realize profits, they do so at the expense of liquidity provider's provided liquidity. When traders realize losses or are liquidated, liquidity providers realize profits at the expense of traders. Therefore a market risk exists for Liquidity Provider!

However, please note that such market risk is different from the impermanent loss of spot exchanges (e.g. Uniswap or Sushiswap). First of all, the fact it is called "risk", instead of "loss", indicates that the mining PnL/LSV result could be negative but also positive (For more details, check out: Mining (AMM Liquidity Mining)). Secondly, the probability of a negative result (a loss) on Deri liquidity mining pools is much smaller than that of typical spot exchanges due to the protection by arbitrageurs, although a certain market risk remains. You might think of liquidity mining on Deri as investing in a low-risk fund with potentially very high profit, whereas that risk-free liquidity mining is like depositing your money into a bank saving account.

Please refer to our whitepaper for further details regarding the protection by the arbitrage mechanism.

Since AMM liquidity mining is not risk-free, can I hedge the market risk of my liquidity contribution?

Yes, it is possible. Actually, it's quite convenient for sophisticated liquidity providers to do so: Liquidity miners merely need to hedge the portion of the risk exposure associated with their liquidity contribution.

For example, if you contribute 1% of the pool TVL and currently, the risk exposure (i.e. the net position) of the pool is 10 BTC and -1000 ETH, then you just need to hedge the part of the risk exposure for your part, i.e. 0.1BTC and -10ETH.