Defrost’s Mining Boosting Mechanism is a brand-new mechanism that allows MELT stakers to earn boosted mining rewards in MELT when providing liquidity to H2O.
After staking MELT in the new MELT single-coin staking contract, and depositing the SMELT (staked MELT) into the mining pool, they will be able to boost their mining APR potentially by up to 450%.
The boosting contract will also distribute H2O stablecoin rewards, collected from the protocol fees, to MELT stakers.
Please note that there is no lock-up requirement for the SMELT staked in the boosting contract.
SMELT is auto-compounding in MELT, even when boosting in the mining pool. But keep in mind that the SMELT : MELT exchange rate is ever-increasing. Therefore, it is recommended to get some MELT and stake in the pool as early as possible.
How does the Mining Boosting Mechanism work?
MELT stakers will enjoy a boosted APR based on the SMELT deposited into the mining contract. The boosting effect will depend on how much SMELT is deposited into the mining pool and will be calculated according to the formula below:
Boosted APR = Basic APR * (1+ Boosting Effect)
The minimum requirement for boosting the rewards is 1000 SMELT. If you stake less than 1000 SMELT into the boosting contract, you will not have any boosting effect and the APR will remain the same. In other words, the boosting effect will be zero.
Users who deposit 1000 SMELT in the mining contract will get an immediate 3% boost. For example, if the basic APR is 50%, then the boosted APR will be 50%*(1+3%) = 51.50%.
The more SMELT one deposits, the higher the boosting effect will be, following a linear calculation. For every 1000 SMELT deposited, one will have an additional 1% boosting effect on the APR.
Boosting Effect = 3%+(deposited SMELT/1000-1)*1%
The boosting effect will be capped at 450% and will follow this graphic pattern:
Which pool will benefit from the boosting effect?
There are three mining pools that can benefit from the boosting effect, the DefrostH2O3CRV mining pool on Curve, the MELT/AVAX and H2O/AVAX pool on Traderjoe. There is a "Boosting" icon just behind the name of the mining pools.
The basic rewards in the three boosting mining pools are 47,000 MELT, 3,000 MELT and 1,000 MELT per day respectively.
Early contributors in the DefrostH2O3CRV liquidity pool (predetermined before deployment with contributed capital larger than $500K) are whitelisted and eligible for boosting their mining APR by 20%, for 3 months from the protocol's deployment.
How about the H2O distribution?
50% of the protocol fees in H2O will be distributed directly to the SMELT holders using the DefrostH2O3CRV boosting contract.
This means in the DefrostH2O3CRV boosting pool, users can earn rewards in both MELT and H2O from staking in the boosting contract, while at the same time enjoying boosted MELT mining rewards when providing H2O liquidity.
Even if you are not mining MELT by providing H2O liquidity, by simply depositing SMELT in the boosting contract, you are still eligible for the H2O distribution.
Currently, the MELT/AVAX and H2O/AVAX boosting pool on Traderjoe doesn't have H2O distribution.
Let’s suppose Alice is mining MELT with DefrostH2O3CRV LP tokens and enjoys a 40% APR in MELT. The single-coin MELT staking pool has a 85.89% APY.
The basic mining APR in the boosting mining pool is 38%. Alice stakes 20,000 units of MELT into the boosting contract and enjoys an additional 22% boosting effect in terms of APR.
The real APR after boosting will be 38% * (1+22%) = 46.36%.
Alice will also enjoy the H2O rewards for her staked MELT with an APR of 40% based upon the MELT staked.