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.
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