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Tuesday, July 5, 2022

How to become a Bullrun Babes liquidity provider?

This post was originally published on NFTX

How to become a Bullrun Babes liquidity provider?

In this blog post we’re going through the entire process of becoming a Bullrun Babes liquidity provider on popular exchanges such as Sushiswap, using the NFTX Bullrun Babes index fund.

In this blog post we’re going through the entire process of becoming a Bullrun Babes liquidity provider on popular exchanges such as Sushiswap, using the NFTX Bullrun Babes index fund.

NFTX is a protocol that allows anyone to create and invest into index funds which are 1:1 backed by NFTs. This brings the DeFi and NFT communities together, enabling NFTs to be used as collateral for use cases such as AMM liquidity providing, yield farming and borrowing/lending.

$Babes-Basic Token

$Babes-Basic Index Fund

SushiSwap pair: https://app.sushiswap.fi/pair/0xeb0bc2816e8dcee567ffd634447eabf471e2dcfd

Visual Bug Notification: We are aware that the current Index fund on our front-end does not automatically update it’s supply & holdings. Use the vault page on OpenSea to view all current Bullrun Babes in the index fund.

Why would I provide liquidity?

Before getting our hands dirty, let’s look at the reason why you would want to put your Babes into an index fund to become a liquidity provider.

The Bullrun Babes NFT launch has been a big community success since it’s launch a few days ago and has claimed a top position on trading volume on OpenSea.

While the volume is clearly trending upwards, secondary markets such as OpenSea don’t allow anyone to take a cut from trading fees. This is where becoming a liquidity provider becomes lucrative, allowing you to take a % fee on every single trade that is made trading the Bullrun Babes index fund whilst bringing trading liquidity to the entire Babes ecosystem.

Meet the Bullrun Babes basic pool

With the NFTX Bullrun Babes Basic Fund, you can now supply one or multiple Bullrun Babes as collateral which gives you back an index fund token called $Babes-Basic, which tracks the ETH-floor price of all Bullrun Babes in the index fund.

This token allows you to become a liquidity provider on SushiSwap (or any other ERC20 AMM) by pooling it together with ETH.

The Bullrun Babes basic pool is set up to accept any Bullrun Babe #ID and does not take into account specific attributes of the NFT. Because of this, this index fund will organically become a fund that attracts the least valuable Babes, often referred to as floor Bullrun Babes. Floor prices are able to stay in parity due to arbitrage opportunities which arise when the price is either too high, or too low.

Note: Redeeming your collateral from an index pool will give you back a random other Bullrun Babe from the same index fund – there is no guarantee you get back your original Babe.

Getting Started

To get started, the first thing you will have to do is supplying one (or multiple) Bullrun Babes to the Bullrun Babes Basic Index Fund.

ChopChop has recently recorded a video tutorial that takes you step-by-step through the entire process of putting an NFT in an index fund as collateral. While the video tutorial talks about Punk-Basic as an example, the entire process except the difference in NFTs stays the same for setting up your Bullrun Babes.

Note: Bullrun Babes, as opposed to Cryptopunks shown in the tutorial below, do not have to be wrapped before being used to mint a fund token.

Note: As gwei prices are very high at the moment, the costs of minting a D1 token are rather high. If you are not providing significant collateral, it may be worth to wait until gwei prices normalize.

How to add my $Babes-Basic as liquidity on an exchange?

After successfully going through minting your index fund tokens by following the tutorial above, you will be ready to become a liquidity provider on an AMM (Automated Market Maker) such as SushiSwap.

The process of becoming a liquidity provider is a fairly simple process and requires you to provide your $Babes-Basic token, in combination with a second currency you want to pair it against, to the liquidity pool of an exchange. As ETH pairs are often in highest demand, we will take ETH as an example.

Taking SushiSwap as an example, you can provide liquidity by going to the Babes-Basic/ETH pair page and provide liquidity by clicking on the +liquidity button on the right side of the page.

Redeeming a Bullrun Babe from the index fund

When you are done being a liquidity provider, or just want to arbitrage an NFT out of the index fund, you can do so by using the redeem function on the NFTX website. As index funds are 1:1 backed, redeeming an NFT out of the fund decreases the supply of index fund tokens.

A video tutorial is available below where ChopChop walks you through the entire process.

That’s it! If you have any questions regarding the Bullrun Babe fund, need assistance in providing liquidity or redeeming Bullrun Babes from the index fund, make sure to join our dedicated Bullrun Babes Discord channel!

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