Liquidity Pools and Adding Liquidity
GanjaSwap Pools allow you to provide liquidity by adding your tokens to liquidity pools or “LP”s.
When you add your token to a liquidity pool (LP), you will receive Seed-LP tokens (GanjaSwap's version of liquidity provider tokens).
As an example, if you deposited $SEED and $BNB into a liquidity pool, you would receive SEED-BNB Seed-LP tokens.
The number of Seed-LP tokens you receive represents your portion of the SEED-BNB liquidity pool. You can also redeem your funds at any time by removing your liquidity.
Providing liquidity is not without risk, as you may be exposed to impermanent loss. “Simply put, impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet.” - Nate Hindman
It’s not all bad for liquidity providers as you will also be given a reward in the form of trading fees. Whenever someone trades GanjaSwap, the trader pays a 0.2% fee, of which 0.17% is added to the liquidity pool of the swap pair they traded on.
- There are 10 DAB tokens representing 10 SEED and 10 BNB tokens.
- 1 DAB = 1 SEED + 1 BNB
- Someone trades 10 SEED for 10 BNB.
- Someone else trades 10 BNB for 10 SEED.
- The SEED/BNB liquidity pool now has 10.017 SEED and 10.017 BNB.
- Each DAB is now worth 1.00017 SEED+ 1.00017 BNB.