As a front-end operator, not only can it provide end users with a web interface to interact with the Liquidity protocol, but it can also receive a portion of the LQTY tokens generated by users in return. Such a mechanism not only incentivizes front-end operators, but also promotes the popularity and development of the Liquidity protocol. This article will dive into the reasons for becoming a frontend operator, what it takes to run a frontend, and how to calculate and earn rewards.
Why become a front-end operator?
The front-end operator provides end users with an intuitive web interface that enables them to interact with the Liquidity protocol. This not only improves the user experience, but also enables operators to be rewarded with LQTY tokens. These rewards are generated by depositors of the stability pool and distributed proportionally between users and front-end operators. The setting range of the rebate rate is between 0% and 100%, which means that operators can flexibly adjust the rebate rate according to their own needs and the needs of users.
A high rebate rate may attract more users, but an elegant interface and additional features can also lower the rebate rate while keeping users interested. This enables front-end operators to obtain more LQTY tokens while providing quality services.
How to run the front end?
There are many different ways to run a front end. You can use the front-end SDK provided by Liquity to install the front-end startup kit, or integrate the protocol into your running environment. These tools enable front-end operators to quickly get up and running and start delivering services.
Reward mechanism for front-end operators: Rewards for front-end operators are paid in LQTY tokens. These rewards are calculated based on the total deposit marked on the frontend. Assuming that in the LQTY reward event, Liquidity generates LQTY_d rewards for depositor d at a rebate rate of k through the front-end, then the front-end operator will receive (1-k) LQTY_d of LQTY, and the user will receive kLQTY_d of LQTY.
Front-end rewards and user rewards come from the same asset pool. Based on the rebate rate of the front-end and the total rewards accumulated by users, the front-end can obtain a share from the 32,000,000 LQTY allocated to users.
How to pay for rewards
Each stable pool deposit is tagged by its front-end Ethereum address. This address is where the front-end LQTY rewards are accumulated. This design makes the distribution of rewards more transparent and fair.
The role of the front-end tag: When the user calls provideToSP(uint _amount, address _frontEndTag), the front-end tag will be placed on the deposit in the stable pool. This tag will remain on the user's deposit even if they later use a different frontend. The tag can also be a 0 address, which means the user will receive 100% of the accumulated LQTY rewards.
In order to add a new frontend tag and benefit from the different rebate rates, users must completely withdraw their stable pool deposit and re-deposit with a new frontend and new tag. It’s important for front-end operators to be aware of this dynamic.
Front-end registration and rebate rate settings
Front-end operators do not require prior approval to run the front-end. This process is completed by calling the registerFrontEnd(uint _kickbackRate) function on the Liquidity Stable Pool smart contract. The rebate rate is a value between 0 and 1 (e.g. 0.8 = 80% rebate rate).
Adding frontends to the Liquity.org registry: Frontend operators can add their own frontends to the Liquity.org registry. This can increase the exposure of the front end and attract more users.
Adjustment of the rebate rate: Frontend operators can set a rate between 0 and 100% that determines the proportion of LQTY paid as a rebate to stability providers using the frontend. If the front end sets the rebate rate to 60%, then their users will receive 60% of the reward and the front end will receive the remaining 40%.
Once an address is registered as a frontend in the stable pool with a specified rebate rate, it cannot be changed. However, if a front-end operator wishes to change their rebate rate, they must register a new front-end address with the new rebate rate. In order for users to take advantage of the new rebate rate, users must withdraw their original deposit and deposit again using the new front-end tab.
The reason why the Liquity team does not run the front end: The Liquity team does not run its own front end. Doing so increases Liquity’s censorship resistance and decentralization, and also helps guide the development of the distributed ecosystem. This design makes the Liquidity protocol more transparent and fair, promoting the healthy development of the entire ecosystem.
in conclusion
Becoming a front-end operator can not only provide users with convenient services, but also obtain generous LQTY token rewards. Such a mechanism not only incentivizes front-end operators, but also promotes the popularity and development of the Liquidity protocol. By flexibly setting rebate rates and providing quality services, front-end operators can succeed in this decentralized ecosystem.