Adding liquidity allows the contributor to earn 0.2% swapping fees from the pairs they've provided. Your liquidity can earn even more rewards if it's staked in farms!
When you've provided liquidity, you will receive LP tokens as proof of contribution. For example, if a user deposited ZAP and TLOS into a pool they would receive ZAP-TLOS LP tokens. These tokens represent a proportional share of the pooled assets.
If at the time of a trade, there are 100 LP tokens representing 100 TLOS and 100 ZAP, each LP token would be worth 1 TLOS and 1 ZAP. If one user trades 10 TLOS for 10 ZAP, and another traded 10 ZAP for 10 TLOS, then there would now be 100.02 ZAP and 100.025 TLOS in the pool. This means each LP token would be worth 1.00025 TLOS and 1.00025 ZAP when it is withdrawn.
You need to provide tokens in a 1:1 value ratio to the liquidity pool. This means that if you are adding to, say, a ZAP-TLOS pool, and wish to provide 2000 TLOS worth of liquidity, you would need to convert approx 1000 TLOS to an equal value of ZAP tokens first via our Swap.
If the pool you wish to provide liquidity to does not exist, you can create it of course! Just provide the tokens and off you go. As the first liquidity provider, you set the initial exchange ratio if one of the tokens in the pair does not exist on Zappy yet. This often quickly corrects itself through arbitrage and by more liquidity providers adding to the pool.
By adding liquidity, you are putting an equal USD value of 2 tokens to make LP tokens. Here's how to do it:
Steps 1. Connect your wallet, make sure that it is on Telos EVM 2. Go to Liquidity
3. Press "Provide Liquidity"
4. Choose the tokens that you want to provide liquidity for
5. Enter the amount you'd like. The other token amount will automatically adjust to the same value in USD.
6. When you're happy with the amount, click "Add Liquidity" and your wallet will ask you to confirm. If this is your first time making LP tokens with the selected tokens, click "Approve" for both tokens. This may take a few seconds to update from your wallet. Click "Supply" after it becomes enabled.
Voilà! You have made your liquidity and will now start earning fees!