Liquidity Providers

Liquidity providers play a major role in every DEX by supplying funds to the liquidity pool, and the pool enables traders to trade the supported trading pairs. By providing their funds to these pools, liquidity providers ensure that there are enough assets available for trading, allowing smooth and efficient transactions.

One can start journey of Liquidity Providers by proving fund to Pool here.

LP Benefits

  • Based on the PnL of the traders, all trades are routed through the liquidity pool, and traders PnL are settled by the pool itself. So the liquidity pool benefits from the losses that traders incur when they trade on the platform.

  • Fixed trading fees: Currently, for every trade, 60% of the entire protocol-collected fee is distributed among LPs who chose to stake LLP tokens, and 40% is collected by the protocol as an insurance fund.

Risks involved in becoming an LP

LPing is not always risk-free and comes with some risks involved in it.

  • If traders consistently experience positive monthly net profit over an extended period, liquidity providers may encounter negative APR rates. Conversely, when traders incur losses, LP positions will benefit from these trader losses.

However, the protocol has taken into account precautionary steps to mitigate unprecedented exposure for pools on either short or long by monitoring the OI of global shorts and longs positions

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