Understanding APY and How it's Calculated on Plit Protocol

PLIT protocol provides 50:50 to dex, 50% is the stable token and 50% is the project token. The fees earned by providing liquidity will be split between stable tokens and project tokens. So if LP generates 100$ in fees the users who provided the stable tokens will get 50% of the fees which is 50$.

In this example, we are using a new trading pair GPT/USDC. we are providing 500$ USDC and 500$ worth of GPT. TVL $482.3K. 24h volume: $3.5M.

Date = 16-03-2023.

To calculate the APY for the pair of GPT/USDC, we will need to estimate the fees earned by the liquidity pool over a certain period of time. Assuming that the 24h volume of $3.5M remains relatively constant, we can use this value to estimate the daily fees earned by the liquidity pool.

Assuming a trading fee of 0.3%, the daily fees earned by the liquidity pool would be: $3.5M * 0.003 = $10,500

Over a 365-day period, the fees earned by the liquidity pool would be: $10,500 * 365 = $3,832,500

Now, let's calculate the annual percentage yield (APY) for your liquidity provision of $500 USDC and $500 worth of GPT.

First, we need to calculate the total value of the liquidity pool, which is: $482,300 + $500 + $500 = $483,300

Next, we calculate the percentage of the liquidity pool that you provided, which is: ($500 + $500) / $483,300 = 0.207%

Finally, we can calculate the APY using the following formula:

APY = (fees earned / total value of the liquidity pool) * percentage of liquidity provision * 100%

APY = ($3,832,500 / $483,300) * 0.207% * 100% = 32.7%

Therefore, the APY for your liquidity provision of $500 USDC and $500 worth of GPT in this trading pair would be approximately 32.7%.

APY

The APY = 32.7%. and the users will get apy for the 500$ they provided. The fees of the PLIT protocol are not added to the calculation.