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 EGG and UTG into a Liquidity Pool, you'd receive EGG-UTG LP tokens.

The number of LP tokens you receive represents your portion of the EGG-UTG 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 PenguinSwap, the trader pays a 0.25% fee, of which 0.17% is added to the Liquidity Pool of the swap pair they traded on.

For example:

• There are 10 LP tokens representing 10 EGG and 10 UTG tokens.

• 1 LP token = 1 EGG + 1 UTG

• Someone trades 10 EGG for 10 UTG.

• Someone else trades 10 UTG for 10 EGG.

• The EGG/UTG liquidity pool now has 10.017 EGG and 10.017 UTG.

• Each LP token is now worth 1.00017 EGG + 1.00017 UTG.

To make being a liquidity provider even more worth your while, you can also put your LP tokens to work whipping up some fresh production on the EGG IGLOO, while still earning your 0.17% 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