If you are familiar with the DeFi space you have probably heard about Yield Farming. However, Trade Mining might be a new concept to you. Simply put, “Trade Mining” is as it sounds, you are given the ability to mine tokens via trading. Furthermore the new AMM platform SakeSwap has just announced the launch of their very own trade mining token, the S Token. So traders can earn more SAKE with their S token which is distributed based on the number of actual pool transactions.
Uniswap distributed UNI tokens to more than 250 thousands historical users who swapped the token on Uniswap. This is a kind of trade incentive at one time.
How does Trade Mining work?
Trade mining works by allocating a special token to users for each transaction they make on a specific platform. In the case of SakeSwap, the S Token. In addition, each time a user transacts on the SakeSwap platform, they earn S token.
Similar to LP Tokens in Yield farming, you can take the token you have Trade Mined and stake that to earn more of the native token. In the case of SakeSwap that means you can stake the S token in a pool to earn more SAKE.
What are the Benefits of Trade Mining?
One of the biggest issues faced by users trading on DEXs like Uniswap today are the gas fees for each transaction. And lately that has been an obscene amount up to 500 or greater in Gas Prices.
The key benefit of Trade Mining is that it gives users the ability to offset their transaction fees by earning a trade mining token (like the S Token) and then staking it to earn SAKE. Which can easily trade into other cryptos or stablecoins at the user’s discretion. Furthermore, trading the SAKE earned into other cryptos also helps the user Trade Mine more!
What is the Difference between Yield Farming and Trade Mining?
To date, all of the yield farming on various swap platforms do not provide incentive according to the liquidity contribution.
For example, a developer has set up a sake/sushi pair pool on Uniswap, this pool has had no transactions in the past 3 days, however this pool can still get the rewards according to the farming protocol.
Why is this? It’s because the yield farming reward distribution is not based on the number of actual pool transactions but the pair staking contribution.
Here we can see the normal trading behaviour in a DEX, for example User A uses ETH to swap for SAKE on Uniswap, in doing so, the User contributes his transaction volume to the ETH-SAKE pair pool.
In the case of Trade Mining like with SakeSwap’s S token. The S Token is a reward for SakeSwap user’s trading activities which allows traders to deposit their S token in the Sake AMM to mine more Sake. Moreover, this provides a mechanism for users to inadvertently reduce gas fees and increase their profits.
Probably the most important advance in this development is how the S Token can help SakeSwap open sake AMM/yield farming protocol to all the third parties. It will be “AMM/yield farming as service”; third parties can get Sake reward according to the transactions executed and tracked via the S Token. Meaning a third party can focus their farming reward distribution to their customer and use the SakeSwap smart contract as a farming/AMM pair pool host service.
How to Get SakeSwap’s S Token?
S Token is rewarded for users trading activities — allowing traders to then deposit their S Token in the trade mining pools to further mine SAKE token as a reward. And each pool has a corresponding S Token. (e.g. SAKE-ETH S Token for SAKE-ETH pool)
How to start Trade Mining on SakeSwap?
Liquidity Providers of SAKE-ETH are eligible to participate in Trade Mining which means they can harvest SAKE through Yield Farming and Trade Mining at the same time.
- Deposit SAKE-ETH SakeSwap LP token to farm SAKE through Yield Farming
- Swap in SAKE-ETH pool to get the pool S Token if you don’t have any
- Deposit SAKE-ETH S Token to mine MORE SAKE through Trade Mining
- Stake the S Token and LP Token together to Farm more SAKE
Weight formula: LP Token +(S Token * 100)*(if LP Token>0, 1,0)
This is how smart contract calculates the weight of your staked SAKE-ETH LP token and S token. The weight of the deposited S Token is doubled – mining more SAKE because of more shares in the pool.
Trade Mining provides an incentive to use platforms that provide this service. The more you trade mine, the more of the native token like the S token on SakeSwap you can earn. Furthermore the more S token you earn the more Sake you can mine. So this mechanism provides an extra stream of revenue to users, which ultimately offsets gas fees and increases their profits.
SakeSwap trade mining is live on their platform. So if you’d like to give this a try, follow the link below:
Note: This article is purely informative and should not be interpreted as the solicitation of financial advice.
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