Liquidity Providing
Adding Liquidity couldn't be any easier....
The CaviarSwap V2.2 Engine is unique solution to providing liquidity to a DEX by allowing liquidity to be added in a Single Token
Every token has value, let's put it to work and earn some fees!
👍
Like any liquidity providing, the point is to use your token(s) to earn fees through other peoples trades on the DEX
- Providing liquidity in a token(s) that never trades, wont't earn you any fees from the trading
- If you provide liquidity in something that has a lot of liquidity already, your tokens are helping the DEX so you will earn, but less (because there are already lots of tokens)
- if you provide liquidity in a token with high volatility, volume and smaller liquidity you will earn more and take a higher proportion, though if the price of your token changes a lot vs the basket you might still make a loss when you remove your liquidity
Like all LP, you want a relatively stable price range with decent volume trading and you'll make a return
With conventional pair-based AMMs:
- You add both tokens of the pair in equivalent value - eg XRD and CAVIAR together
- In return you get a liquidity token representing your share of the combined liquidity
- Trades done in that pair accrue fee revenue
- When you remove liquidity you get back your percentage share of the two tokens in the pool
- This includes your share of the fee revenue for this pair
- The Token ratios may have changed (eg you could get back more CAVIAR, less XRD)
- This balance reflects IL (impermanent loss) versus fees earned
With CaviarSwap V2.2:
- You add one token (or many but assume 1 here) - eg CAVIAR
- In return you receive a liquidity token representing your share of that current token’s worth
- You accrue fee revenue for trades where your token was used
- When you remove liquidity you get back:
- Your percentage share of the current token’s worth
- This includes your share of the fee revenue
- In rare circumstances other tokens are returned instead of your originally staked token
Last modified 3mo ago