In this post, I’ll be providing a step-by-step guide on how to provide liquidity and earn rewards using Saddle Finance’s D4 Pool. You can find the original announcement for the pool here.

Quick Disclaimer: This tutorial is not a recommendation and interacting with DeFi protocols can be risky. The D4 Pool is experimental, please do your own research and use your best judgement.

What is Saddle Finance and the D4 Pool?

Saddle is a decentralized exchange designed to enable efficient trading between same-peg crypto assets. Akin to Curve and Uniswap, there are liquidity pools (e.g. the D4Pool) where users can provide liquidity and earn trading fees and rewards. I would recommend reading their docs if needed before continuing.

Usually I’d start with an intro for Liquity, but there’s more to it this time. Saddle’s D4 Pool consists of arguably four of the brightest up and coming decentralized stablecoins: LUSD (Liquity Protocol), alUSD (Alchemix), FEI (Fei Protocol), and FRAX (Frax Finance)! We’ll save the descriptions of each project for another time to keep it short.

Not only is the D4 Pool an interesting experiment, all four protocols are incentivizing the D4 pool with rewards (LQTY, ALCX, TRIBE, FXS) for up to one-year. This has to be a record 🧙🏽

Navigating through Saddle’s Homepage

In order to participate, you’ll have to find your way to the Saddle homepage, then click on Saddle App in the top-right corner.

Providing Liquidity

Afterwards, Saddle’s Exchange UI will open up in a new tab. Before you can start earning rewards, you need to provide liquidity as displayed below. You can do this by switching over to the Pools tab, then clicking Deposit under the D4 Pool.

Users can then deposit LUSD, alUSD, FEI, or FRAX. Keep in mind that you can also add all of the coins in a balanced proportion or a proportion you find suitable (e.g. 10,000 LUSD and 10,000 alUSD).

Quick tip: You may notice that I’m receiving a deposit “bonus” below. A deposit bonus occurs when you deposit a token with the lowest share in the pool. This happens because the pools are trying to balance themselves and go back to equal parts — rewarding users who hasten the process. Deposit bonuses also work in the negative direction for already heavily weighted sides of the pool.

As shown above, I’m opting to only deposit LUSD to get that nice deposit bonus. You can acquire LUSD by opening a Trove or buying it off of a DEX.

You also might have noticed a few stats on the deposit panel:

• APY: This represents the APY users receive (from trading fees) by providing liquidity. This doesn’t include the extra token incentives from each protocol.
• ALCX/FXS/LQTY/TRIBE APR: This got added to the panel after I recorded the GIF above (😢), but it represents the minimum APR users can earn from token rewards if they stake their LP tokens.
• Currency Reserves: This represents the percentage of the pool that each stablecoin represents, as well as how much in dollar terms.
• 24h Volume: This represents the daily 24h volume for each pool.

The rest of the stats are out of scope, so I won’t cover them here.

All that’s left for you to do is click Deposit and approve the subsequent transactions.

Note: As you can see above, my LUSD deposit got split between the other stablecoins in the pool. This is by design and your balance will change constantly as people trade in and out of the D4Pool.

You’ve now provided liquidity! If needed, you can withdraw at any time by accessing this page. After depositing, you also receive LP tokens that represent your share of the D4 Pool — we’ll use these to earn those sweet token rewards.

Staking your LP Tokens in Frax Finance’s UI

To earn rewards, you’ll need to head over to the Frax Finance staking page here. For now, this is the only staking interface for D4 Pool rewards.

You’ll first notice all of the stats on the right-hand side (e.g. TVL, LP Staked), most of which are self-explanatory, so I’ll only cover one of them:

APR (Normal / Max): Before staking the LP tokens, users must choose a lockup period. As you can see at the bottom-left hand side of the UI, the lockup period I chose was 7 days (the minimum). With this lockup, I’ll gain the normal ~53% APR (Note: This is subject to change as more people stake their LP tokens). If you want to earn more yield, you’ll have to increase the lockup period for your LP tokens. The max lockup is 365 days and it gives stakers a 2.5x rewards multiplier, which allows users to earn the max APR.

Note: The UI has since switched to say “Base / Max”, but the description above still applies.

After choosing your preferred lockup period and how many LP tokens you would like to stake, all you have to do is click Stake in the UI, confirm some transactions, and you’ll begin earning LQTY, ALCX, TRIBE, and FXS all in one farm 🧑‍🌾

The UI should transform and show these stats and functions at the bottom:

For those unfamiliar with these tokens, here’s a brief description of each:

• LQTY: LQTY is not a governance token. It is only used as a reward mechanism within the Liquity ecosystem and can be staked to earn 100% of protocol revenue with no additional risks attached such as token slashing or backstopping.
• ALCX and TRIBE: Alchemix and Fei’s tokens are quite similar. They both represent governance rights within their protocols and are mostly used to bootstrap their ecosystem by acting as a reward mechanism. There are some differences, but the main utilities are the same.
• FXS: Frax’s FXS token represents governance voting rights, accrues fees, seigniorage revenue, and excess collateral value.

As for the rewards UI: Most of it is self-explanatory, but one thing you’ll want to pay attention to is Time Left. You won’t be able to withdraw your LP tokens until that timer runs out, but you can withdraw your earned rewards at any time. If you’ve made it this far, happy farming!

What Next?

This is an exciting collaboration between 5 (including Saddle) young protocols, four of which are innovating in the stablecoin space. I encourage readers to learn more about each project and use their newly earned tokens to expand their participation in various ecosystems.

Liquity: https://www.liquity.org/

Alchemix: https://alchemix.fi/

Frax Finance: https://frax.finance/

Fei Protocol: https://fei.money/

Saddle Finance: https://saddle.finance/

Resources: Website | Twitter | Discord | Telegram | Github | Reddit | LiquityCN

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