You can get answers for frequently asked questions for Depth
I. What is Depth?
Depth is a secure and efficient stable assets management protocol. Depth allows swap as well as farm stablecoins in a safe and secure environment with good depth, low slippage, and low transaction fees. Depth has delicately selected multiple yield aggregators for users, Depth also integrated other DeFi yield protocols, providing users long-term extra rewards in a safe condition.
II. Which Wallets Support Depth?
MetaMask is a decentralized wallet, which can let you interact with Depth and other Dapps. You can also use it with Ledger and Trezor hardware wallets. It is the most popular Ethereum network wallet and is available as an add-on to most browsers.
LP, also called "liquidity providers", are users who provide liquidity on Depth or other DeFi protocols，that is staking assets such as stablecoins to contracts.
2. What is LP Token (The Proof Token of Liquidity Provider)?
When depositing assets into Depth's pool, you will receive a proof token that represents the share of your assets in the pool. For example, if you deposit a certain amount of HUSD and USDT into the Channels pool, you'll get a certain amount of Depth.Fi cHUSD +sUSDT LP Token. The more LP Tokens you have, the larger proportion your share takes in the pool.
3. What Happens When Providing Liquidity on Depth?
When depositing a single type of stablecoins on Depth, Depth will automatically divide it into two types of stablecoins according to a certain ratio. Please keep in mind that if you deposit 1000HUSD to the Depth-Channels pool, the liquidity you added actually automatically turned into a certain proportion of USDT and HUSD according to the algorithm (for example, in order to maintain the balance of the pool, the stablecoins you deposited may become 490 USDT and 510 HUSD). With the change of subsequent user transactions and stablecoin price, the value and proportion of your assets in the pool will continue to change.
Depth's foundation is built on liquidity pools/AMM (Automated Market Making). Imagine here is an initial pool of 100 HUSD/100 USDT. If you want to use 1 HUSD to swap for USDT, what you need to do is to put 1 HUSD into the liquidity pool first. Assuming that the pool allows you to take 0.98 USDT (disregarding the exchange fee) after calculation, you complete a transaction of swapping 1 HUSD to 0.98 USDT. Once the transaction is completed, the pool's composition becomes 101 HUSD/ 99.02 USDT. This process is done by an automated market maker (AMM), without involving any traditional market maker or artificial/robotic market making. All users are interacting with the pool itself.
In the case above, if you use the optimized AMM model algorithm（Algorithm currently used by depth）, you can take more USDT with the same amount of HUSD when doing the same swap. For example, you can get 0.999 USDT using 1 HUSD. The slippage is low on Depth and this is the advantage of this platform.
In the above case, the person who provided 100 HUSD/USDT to the pool is called a liquidity provider. Liquidity providers are willing to put their coins in it because they can get rewards from transaction fees. Besides, they can get rewards from lending protocols, smart pools, and LP mining.
V. How to Get Rewards on Depth?
1. Share of Transaction fees
When using Depth to swap stablecoins, people have to pay a little amount of transaction fees (0.04%). This is a relatively low fee for users compared to other centralized and decentralized exchanges. The larger the volume of transactions on Depth is, the higher APY the liquidity providers will get.
2. Lending Protocol Rewards
Stablecoins provided by liquidity providers will be automatically deposited into HECO's lending protocols to receive APY from the lending platform and gain the lending protocol's mining rewards (According to the rules of the lending platform). The integration of lending protocols can give users higher rewards, however, it also brings higher risk.
3. Smart Pools/Vaults/Yield Aggregators
Depth will cooperate with Smart Pools/Vaults/Yield aggregators and launch new pools in the future. The stablecoins from liquidity providers will be automatically put into these partners to earn APY and mining rewards. (According to the rules of these smart pools).
Liquidity providers can earn transaction fee rewards from all stablecoin liquidity pools. For some pools, there could be extra rewards like the APY and mining rewards from lending protocols or smart pool protocols. There could also be incentive token rewards for cooperating partners in some pools as well.
VI. Deposit and Withdrawal (Add and Withdraw Liquidity)
1. What is 【Deposit in a Balanced Proportion】?
This is the system-recommended way to deposit coins. By adding stablecoins according to the system-adapted balanced ratio, you can deposit coins with almost no slippage. (Of course, there will be no additional deposit benefits.) For large capital users, this can avoid loss to the greatest extent. Notice that users with large capital might suffer loss (high slippage) not checking this option when deposit.
2. What is 【Deposit Bonus】?
If a stablecoin has a smaller share compared to other stablecoins in the pool, depositing the stablecoin with a smaller share can earn users a bonus. For example, if the ratio of HUSD:USDT in the pool is 30:70, then depositing HUSD will earn users extra bonus.
Theoretically, the price of stablecoins should be almost the same with each other, and when the price of one stablecoin in the pool is slightly higher, its quantity will correspondingly reduce. The algorithm of the pool is always trying to balance the ratio of the assets in the pool to make the ratio of the coins close to 1:1. Therefore, the system will encourage you to deposit the stablecoin with a smaller share so that the pool can return to a balanced state quickly.
3. What is 【Deposit Slippage】?
If a stablecoin has a larger share in the pool compared to other stablecoins, depositing the stablecoin with a larger share will result in slippage, that is, suffering loss. For example, if the ratio of HUSD: USDT is 30:70, depositing USDT will result in slippage.
Theoretically, the price of stablecoins should be almost the same with each other, and when the price of one stablecoin in the pool is slightly higher, its quantity will correspondingly reduce. The algorithm of the pool is always trying to balance the ratio of the assets in the pool to make the ratio of the coins close to 1:1. Depositing the stablecoin with a large share in the pool makes the pool more unbalanced. Therefore the system will punish users for doing so.
VII. Why Tokens cannot be Withdrawn under Certain Circumstances?
Due to the nature of the system, when large withdrawals occur, there will be bits left over. If you need to withdraw the whole amount, you can deposit to the minimum amount of coins allowed to be withdrawn.
Due to the nature of Depth and lending protocols, when a large amount of stablecoin withdrawal occurs and the lending protocol has insufficient liquidity, the withdrawal request may not complete. You can try withdrawing smaller amounts, or wait for the liquidity to increase. (When the liquidity of the lending protocol is insufficient, the APY will normally increase to a very high level so you can earn more by depositing.)
VIII. Risk Reminder
The security audit, code audit cannot completely eliminate all risks. It is still possible that there are bugs in the Depth contract. Please keep in mind that high returns always coexist with high risks.
In Depth smart contracts, no matter which pool you put the assets into, it is necessary to understand that the tokens in the pools may bring systemic risks.
For example, if you don't want to take USDT's risk, don't add liquidity to pools containing USDT.
Depth uses smart contracts of exterior lending protocols, which increases the risks. Therefore, it is important for you to choose the pool of which the risk is under your tolerance.
IX. Where to Learn the Deposit Rewards?
Users can deposit single HUSD or USDT, or deposit HUSD + USDT together. (It is recommended to check 【Add all coins in a balanced proportion】, otherwise, it may cause great loss, i.e. high slippage especially for large capital users). After all, all coins will be automatically divided into HUSD and USDT in a certain proportion in the pool after they are deposited. Users will get LP tokens issued by Depth contract as proof of the liquidity provided after depositing. When withdrawing the principal and rewards, the LP Tokens will be required.
After depositing stablecoins, the amount of LP tokens in the corresponding pool will remain unchanged, but the total amounts of USDT and HUSD will increase, and the increase is the rewards (the rewards is the sum of transaction fees rewards, lending APY, lending token mining rewards and DEP mining rewards). You will get the rewards in USDT and HUSD corresponding to the LP tokens when withdrawing.