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 OBOS and MATIC into a Liquidity Pool, you'd receive OBOS-MATIC LP tokens.
The number of LP tokens you receive represents your portion of the OBOS-MATIC 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 Oboswap, the trader pays a 0.25% fee, of which 0.17% is added to the Liquidity Pool of the swap pair they traded on.
There are 10 LP tokens representing 10 OBOS and 10 MATIC tokens.
1 LP token = 1 OBOS + 1 MATIC
Someone trades 10 OBOS for 10 MATIC .
Someone else trades 10 MATIC for 10 OBOS.
The OBOS/MATIC liquidity pool now has 10.017 OBOS and 10.017 MATIC .
Each LP token is now worth 1.00017 OBOS + 1.00017 MATIC .
To make being a liquidity provider even more worth your while, you can also put your LP tokens to work whipping up some fresh yield on the OBOS Farms, 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.
https://blog.bancor.network/beginners-guide-to-getting-rekt-by-impermanent-loss-7c9510cb2f22
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