🤑Liquidity Provders

Number of LPs

To calculate the number of LPs needed to process the entire merchant volume, we can use the following formula in Math Latex syntax:

$L = \frac{MV}{\frac{LPD}{D}\cdot \frac{100+R}{100}\cdot \frac{LPD}{AT}}$

Where:

• L = Number of LPs needed

• MV = Merchant Volume

• LPD = Liquidity Provider Deposit (the average amount each day)

• D = LP Fixed Cost per deposit

• R = LP Profit on deposit (1%)

• AT = Average Transaction of the merchant

<aside> 💡 This is the example we will follow for the rest of the model. When we solve this model for a merchant volume of 40 million dollars with LP fixed cost per deposit at 3.7 USD, and LP deposits 3000 USD on average, and the average transaction of the merchant is 170 USD, we get:

</aside>

$L = \frac{40,000,000}{\frac{3000}{3.7}\cdot \frac{100+1}{100}\cdot \frac{3000}{170}} \approx 496.43$

Therefore, we need approximately 497 LPs to process the entire merchant volume.