Mint Crypto Bums Now & Earn NFTonPulse Marketplace Fees! 
Richard Heart, the founder of HEX and PulseChain, announced recently that PulseX suffered a deflationary bug that burned all the liquidity providers fees, which made them earn no income but rewarded copiously the farmers. The new version v2 of PulseX has already been deployed, and the users can now move their liquidity; however, new farms are not active yet.
New PulseX v2 version
https://t.co/vZIuPqXDpo v2 with LP rewards is up. You can create pairs and add liquidity. The info page with stats, USD display and farms won't work until enough liquidity and pairs have been added. There's a toggle switch up top to switch from v1 to v2.
— Richard Heart (@RichardHeartWin) June 1, 2023
It was recently discovered that the previous v1 didn’t provide any fees to liquidity providers, and they were used to buy PLSX from the market and burn it instead, to the advantage of everyone who holds the token and to all those who had their LPs in PulseX farms.
PulseX v2 is now operational, and users can access it by switching a toggle button in the upper right corner of the web app.
Liquidity providers will now get the 0.22% fees they were supposed to take on v1, but they can’t put their LP tokens in new farms yet.
“USD display and farms won’t work until enough liquidity and pairs have been added,” wrote Richard Heart.
The users are supposed to unstake their LP from the v1 farm, remove their LP position, recreate their LP position on v2, and wait for new farms on v2. However, it’s not clear when and if the farms will appear in v2. Richard Heart wrote: “It is not known what farms, if any, might appear on v2.” The farms on v1 seem to be working well”.
The v1 and v2 scenarios create an interesting game theory where users need to make a choice if they want to earn from farms on v1 and not earn the LP fees or if they want to move their funds to v2 and earn fees from providing liquidity and risk not having farms.
Overall, the liquidity is now scattered in two places, and it’s not an optimal scenario. According to the statement on the PulseX website, “It’s good to have all the liquidity in a single place.” As a motivation for this statement, they write:
“Centralized liquidity also means the best deals for users because it results in low slippage. Meaning the price moves against them less when they swap. It also means that fewer arbitrage bots become rich equalizing the prices from different liquidity sources. It’s more efficient.”
As a result of the deflationary bug, the farms were very profitable, and users earned more INC than they were supposed to earn. There’s no incentive for them to move over to v2 as, at the present moment, they will earn even more on people quitting v1 and leaving the majority of the shares in the pool to the few who will be the last man standing.
It’s possible that people will just let their farms grow while waiting for new ones to appear on v2, but the longer they wait, the slower the liquidity on v2 builds, and the whole process becomes less efficient than if there was some kind of direct liquidity migration or very strong incentives for LPs and farms.
In v1, liquidity providers couldn’t see the fees they were earning from LP because they were automatically and continuously added to the two token balances in the pool. The same mechanism is also adopted in v2, although this is not an optimal way because the users want to have the possibility of viewing how many fees have been earned.
As for the swapping between v1 and v2 pools, it’s unclear from the information provided whether PulseX.com automatically switches between the pools to execute the best price or if users need to manually choose to trade with v1 or v2.
