Liquidity Pools

When you add your token to a Liquidity Pool you will receive Liquidity Provider (LP) tokens and share in the fees.

LP Tokens

As an example, if you deposited XSP and XDC into a Liquidity Pool, you'd receive XSP-XDC LP (XSP2) tokens.

The number of LP tokens you receive represents your portion of the XSP-XDC Liquidity Pool.

You can also redeem your funds at any time by removing your liquidity.

Liquidity Providers earn trading fees

Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool.

Whenever someone trades on XSwap, the trader pays a 0.3% fee, of which 0.214% is added to the Liquidity Pool of the swap pair they traded on.

For example:

  • There are 10 LP tokens representing 10 XSP and 10 XDC tokens.

  • 1 LP token = 1 XSP + 1 XDC

  • Someone trades 10 XSP for 10 XDC.

  • Someone else trades 10 XDC for 10 XSP.

  • The XSP/XDC liquidity pool now has 10.0214 XSP and 10.0214 XDC.

  • Each LP token is now worth 1.00214 XSP + 1.00214 XDC.

To make being a liquidity provider even more worth your while, you can also put your LP tokens to work whipping up some fresh yield on the XSWAP Farms, while still earning your 0.214% trading fee reward.

Impermanent Loss

Providing liquidity is not without risk, as you may be exposed to impermanent loss.

“Simply put, impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet.” - Nate Hindman

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