Liquidity pool

Liquidity Pools on FusySwap

Overview

Liquidity Pools are the backbone of FusySwap, enabling the decentralized exchange of tokens through an Automated Market Maker (AMM) system. By providing liquidity to these pools, users contribute to the market's depth and efficiency, earning passive income from trading fees in return. FusySwap enhances this concept with cross-chain capabilities, allowing liquidity providers (LPs) to participate not only within single blockchains but across multiple chains, broadening their potential impact and reward.

Becoming a Liquidity Provider

Step 1: Connect Your Wallet

Ensure your Web3 wallet is connected to FusySwap and that it’s configured to the correct blockchain network that hosts the tokens you wish to provide as liquidity.

Step 2: Select a Liquidity Pool

• For Intra-Chain Pools: Choose from existing token pairs on the same blockchain. If a desired pair doesn’t exist, you have the option to create a new pool.

• For Cross-Chain Pools: FusySwap offers the unique opportunity to supply liquidity to cross-chain pools, facilitating swaps that span different blockchains.

Step 3: Supply Liquidity

Enter the amount of each token you wish to supply to the pool. FusySwap will calculate the required ratio and show you the pool's current yield rates. You must supply both tokens in a predefined ratio to ensure the pool remains balanced.

Step 4: Approve and Add Liquidity

Review the details, including your share of the pool and estimated earnings. Approve the transaction in your wallet, and once confirmed, you'll receive FusySwap Liquidity Provider (FLP) tokens representing your share of the pool.

Rewards and Fees

• Trading Fees: A portion of every trade's fees is distributed to liquidity providers proportionally to their share in the pool. FusySwap's competitive fee structure ensures fair compensation for the risks undertaken by LPs.

• Staking Rewards: Some pools may offer additional rewards for staking your FLP tokens, providing another avenue to earn on your investment.

Managing Your Liquidity

• Viewing Your Investment: Access the liquidity section on FusySwap to view your current liquidity positions, including the value of your provided liquidity and accrued fees.

• Adding and Removing Liquidity: You can add more liquidity to increase your share in a pool or remove liquidity partially or entirely. Note that removing liquidity may expose you to impermanent loss, especially in volatile markets.

Risks and Considerations

• Impermanent Loss: When the price ratio of your supplied tokens changes after depositing them into the pool, you might be exposed to impermanent loss. It’s crucial to understand this risk before becoming an LP.

• Cross-Chain Security: Providing liquidity to cross-chain pools involves additional considerations, such as the security of bridging protocols. FusySwap employs rigorous security measures, but LPs should remain informed of the risks.

Conclusion

By providing liquidity on FusySwap, you play a pivotal role in enabling decentralized trading across a multitude of blockchains, earning passive income through trading fees and rewards. Whether you choose to participate in intra-chain or cross-chain liquidity pools, your contribution supports the fluidity and accessibility of the DeFi ecosystem. Join us in building a more interconnected and efficient DeFi future.