Liquidity provision

Glossary

TVL - total value of liquidity locked inside the pool. It changes when liquidity is withdrawn or deposited to the pools.

Imbalance - the measure of liquidity deficit in the pool. The lower , the higher the demand and price for this token.

APR - estimated yearly return on liquidity provided, based on the past bridging activity.

Reserves - the present pool balances.

Reserve deficit - the state when the Imbalance is negative (caused by bridging the assets out of the pool).

Reserve surplus - the state when the Imbalance is positive (caused by bridging the assets into the pool).

Earned - rewards on liquidity provided. They will be credited to your wallet during any operation involving the liquidity pool (i.e., depositing, withdrawing, claiming).

Reserve surplus and deficit

The pool reserves are the representation of the bridging activity. Every time the assets are bridged into or out of the pool, they affect the value of the Imbalance. More assets bridged out of the pool create a reserve deficit. In contrast, when more assets are bridged into the pool, it creates a reserve surplus in the liquidity calculations.

Example: Let’s consider a pool with $100k deposited, Polygon USDC, for example. Initially, it has a TVL of 100k and a Reserve of $100k. If $10k was bridged from it to a different chain, the TVL would remain $100k while the Reserves adjust to $110k.

This event causes the pool’s equilibrium to go out of balance, and the USDC’s virtual price will decrease accordingly, making it more expensive to bridge out of the pool. Bridging $10k back to the pool would result in Reserves changing back to 100k, restoring the equilibrium state.

LP rewards

APR represents an estimated return on liquidity provision to each Allbridge Core pool. The LP incentives come from the bridge fees (80% of bridge fees are used to reward the liquidity providers). For this reason, the value of APR is dynamic, and the APR calculations are based on past bridge activity. Thus, the actual rewards may differ from the indicated APR, and this value should be perceived as a reference.

We are currently working on implementing the additional details section to track the bridge fees from last week to indicate the pool’s dynamic better.

Liquidity rebalancing

Liquidity rebalancing is a mechanism that offers additional incentives for bringing the pool back to the equilibrium value.

When the pools are out of balance, the platform provides a premium for bridging the asset to an imbalanced pool.

More information about the value adjustments is available in the token value section.