How to Make Money on DeFi with HUB
TL;DR: The Minter Hub product and its token HUB offer the vast majority of money-making opportunities for a modern DeFi professional, that is:
- Providing liquidity
By publishing this document, we announce that the first stage of Minter Hub launch is completed. As of today, the HUB token — foundation on top of which the Minter Hub product is built — has been issued on four blockchains:
- Binance Smart Chain
- Minter Hub
Minter Hub is a product that interconnects four chains in a decentralized way and helps users earn in the DeFi (decentralized finance) space. Now that all preparatory work is done, we can present you various options to make money using the most cutting-edge DeFi mechanisms.
For simplicity, we’ll divide income generation into two types:
- For traders
- For holders
Let’s begin with a good working definition of trader. A trader is an active participant in the market who profits from making buy and sell deals.
Just like with any other asset, trading in HUB implies buying lower and selling higher. To assess the prospects, we invite you to look at history first:
- The HUB token was minted on the Ethereum network October 27, 2020
- 50,000 HUBs were distributed among those who contributed to Minter’s progress the most
- The maximum supply is limited at 1M
- In 2021, there will be up to 100,000 HUBs in circulation at most
- The starting price in the HUB/USDT pool was $0.1 per HUB
Based on the tokenomics and possible use cases, you can estimate supply and demand for the token. You can buy and sell HUB on three networks:
Arbitrage refers to re-sale, a situation when you buy lower at one place and sell higher somewhere else.
Cross-pair arbitrage refers to re-sale of HUB across different trading pairs within a single network. For example, let’s take three pools on the Minter network:
The HUB token is trading against BIP and RUBX in two different pools:
- BIP is a base coin of the Minter network
- RUBX is a custom coin that represents a Russian ruble stablecoin
The third pool is a pair without HUB, which is needed for converting BIP into RUBX and the other way around.
An appealing arbitrage situation occurs when it is profitable to sell the HUB token for one coin and later buy it back with another. Or vice versa. Example:
- 1 HUB costs 18,700 RUBX in the HUB-RUBX pool. We sell 1 HUB to get 18,700 RUBX
- 1 RUBX costs 0.82 BIP in the RUBX-BIP pool. We sell 18,700 RUBX to get 15,334 BIP
- 1 HUB costs 15,000 BIP in the HUB-BIP pool. We sell 15,334 BIP to get 1.022 HUB or sell 15,000 BIP to get 1 HUB and keep the remaining 334 BIP
After three operations, the amount of HUB on your balance increases from 1 to 1.022. Such cross-pair arbitrage scenarios — and even more complex ones — are countless, as:
- Transactions are fast and inexpensive
- A liquidity pool with any tokens in it can be created by anyone
- Liquidity can also be provided by anyone who’ll be making money on swap fees
- Each swap transaction in one pool leads to arbitrage opportunities in another
Cross-network arbitrage refers to re-sale of HUB across different chains. For example, let’s take two liquidity pools:
Assume in the first pool, 1 HUB is priced at $1,000. In the second, it is priced at $1,050, according to the corresponding BIP/USDT rate. Since the Minter Hub bridge allows for cross-chain transfers, we can buy HUB on Ethereum, send it to the Minter network (receiving the same amount onto your address), and finally sell it in a Minter pool.
In arbitrage, the most important thing is to make sure your profit isn’t “eaten up” by transaction costs. They include:
- Transaction fee
- In-pool fee
- Cross-chain transfer fee (if necessary)
Cross-chain transfer fee discounts we’ve announced earlier are the undisputed advantage of cross-network arbitrage. The standard fee stands at 1%, but simply holding the HUB token in their wallets, users will get a discount:
- 1 HUB -10%
- 2 HUB -20%
- 4 HUB -30%
- 8 HUB -40%
- 16 HUB -50%
- 32 HUB -60%
Hence, the fee for moving coins between the chains through Minter Hub may go as low as 0.4% (instead of a regular 1%).
Speaking of cross-chain transfers of the HUB token itself, for one year only — until May 15, 2022 — we’re making them completely cost-free (0%) for everyone.
Unlike traders, holders are passive participants in the market who profit from keeping the HUB token on their balance. Currently, there are several ways to do that, and you can either stick to a single one or mix all of them.
A liquidity provider is someone who offers their funds to be used by other users making swaps via pool. For that, they receive a fee on each exchange transaction.
Take the HUB-BIP pool. For traders to be able to swap one token for the other, the pool needs to be liquid. For that, BIP and HUB owners add their tokens into the pool at the 1:1 ratio based on current price. Their share of pool is confirmed by the accrual of LP tokens.
With each swap of HUB for BIP or the other way around, a trader is charged a 0.2% fee that goes into the pool. It is paid in the token sold. Example: if the trader sells 100 HUB for 1.5 million BIP, the fee is 0.2 HUB (0.2% on the sell volume).
The fee increases the number of tokens within the pool, with the share of each provider remaining unchanged. That way, the liquidity pool gets “richer” thanks to the fees. If the provider wants to take some of their profit, they just need to withdraw the desired amount of liquidity from the pool. At the same time, their share of pool will decrease, too.
Farming is an additional reward for LPs. At the time of writing, farming programs have been launched for HUB pools in three networks:
- Ethereum (0.1% daily, payouts in HUB)
- Minter (0.1% daily, payouts in BIP)
- Binance Smart Chain (0.1% daily, payouts in HUB) (coming soon)
First, you need to understand that technically, only Minter Hub oracles can stake HUB from their addresses. They offer users to delegate their tokens so that everyone can join. The initial delegation implies sending HUB to the oracle’s address, from where it will later be transferred to Minter Hub and staked in the node.
After that, for each HUB delegated, oracles will send users a receipt token issued on the Minter network. Those tokens will confirm the staking of HUB on Minter Hub. Validating cross-chain transfers at the up to 1% fees, oracles will start getting reward for each transaction and share that reward with the addresses that hold receipt tokens.
Oracles that support HUB delegation:
- Minter One (receipt token: MONEHUB)
- Chainik (receipt token: HUBCHAIN)
- MonsterHub (receipt token: MONSTERHUB)
- BTC.Secure (receipt token: LIQUIDHUB)
- FriendsTRUST (receipt token: TRUSTHUB)
- Minter.Center (receipt token: HUBCENTER)
You can view the list of oracles here.
Stay tuned if you don’t want to miss out on the new DeFi money-making tools!