FAQ
General
How can I get started using ShibaSwap?
Getting started with ShibaSwap is easy! There's no need to create an account, thanks to the platform’s decentralized nature.
Simply connect a wallet (MetaMask or Coinbase Wallet) with some ETH to cover transaction fees. If you don’t have ETH, you can purchase it from any exchange and send it to your wallet address.
Plus, ShibaSwap now supports Shibarium, our Layer 2 solution on Ethereum, for faster and cheaper transactions!
What is a DEX?
A DEX, or decentralized exchange, is a cryptocurrency trading platform that operates without a central authority, allowing users to trade directly with each other (usually with the use of liquidity pool). It uses smart contracts to facilitate transactions. Unlike centralized exchanges, DEXs typically do not require users to deposit funds, meaning that funds ownership stays in user control.
What is TVL?
TVL is a short of Total Value Locked, which means the amount of money that a DEX has through the entirety of its liquidity pools. It’s often used as a measure of success in a platform.
It can also be used for a single liquidity pool. The bigger the TVL is for a Liquidity Pool, the 'safer' that Liquidity Pool is when it comes to swapping (low slippage) and providing liquidity (fewer chance of impermanent loss).
What is Impermanent Loss?
The Impermanent Loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposit them. The bigger the change is, the more you are exposed to Impermanent Loss.
Then, you might be wondering why people still provide liquidity if they’re exposed to potential losses?
Impermanent Loss can be countered by trading fees and the rewards received during that time you are providing liquidity.
Also, it’s important to note that Impermanent Loss is ‘impermanent’ because token values can revert and you would be able to accumulate the fees and rewards during that duration without impact on your initial deposit.
What are gas fees?
Gas fees are the charges that a blockchain receive to process transactions on the blockchain. They are paid with a native token ($ETH, $BONE etc.). Gas fees on Ethereum are historically high due to the blockchain congestion and lack of scalability. However, gas fees on Shibarium are usually a few pennies.
What is staking?
Staking is the process of participating in the validation of transactions on a proof-of-stake (PoS) blockchain by locking up a certain amount of cryptocurrency. Stakers heLiquidity Pool secure the network and, in return, earn rewards in the form of additional cryptocurrency. This process supports the network's operations, such as transaction validation and block production, without the need for energy-intensive mining.
Liquidity Pools
What are the changes in Swap V2?
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Concentrated Liquidity Pools with variable fee tiers: Users can now provide liquidity within a specific price range, allowing for more efficient use of capital. Additionally, you can choose from three swap fee tiers: 0.05%, 0.30%, or 1.00%.
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Claim Rewards Without Withdrawing Liquidity: You can now claim rewards without needing to remove your liquidity from the pool.
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Multi-hop Swaps: If a direct swap between two tokens isn’t available, the system will automatically route the trade through multiple pairs to complete your transaction.
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Direct Migration from V1 to V2 Liquidity Pools: Liquidity providers can easily migrate from V1 to V2 pools without withdrawing liquidity from V1 first.
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APR Display for V1 and V2 Pools: The platform now shows the Annual Percentage Return (APR) for both V1 and V2 liquidity pools, heLiquidity Pooling you compare potential returns.
What are the differences between V1 and V2 Pools?
In V2, liquidity providers can concentrate their funds within specific price ranges, leading to more efficient capital use and potentially higher returns (APR%). Users can choose from fee tiers (0.05%, 0.30%, or 1.00%) and claim rewards without withdrawing liquidity. To enjoy the benefits of Swap V2 while minimizing changes, you can select “low-risk” price range that functions similarly to V1.
What rewards can I get by providing liquidity?
Rewards from providing liquidity primarily come from swap fees. Swap fees are transaction fees that users pay when they trade (or "swap") one cryptocurrency for another on the DEX. These fees are typically a small percentage of the total trade value and are collected to compensate liquidity providers (Liquidity Pools) who supply the assets that enable trading on the platform. By providing liquidity to a token pair, you earn fees from trades within that pair.
In the latest version, you can choose from three swap fee tiers: 0.05%, 0.30%, or 1.00%, depending on the pool. The Annual Percentage Return (APR) displayed for each liquidity pool heLiquidity Pools you compare potential earnings from these swap fees. Additionally, you can now claim your rewards without withdrawing liquidity, a feature that previously required liquidity removal to access earned fees.
What are liquidity pools?
Liquidity pools are pools of tokens locked in a smart contract on a DEX to facilitate trading. They provide the liquidity needed for users to swap between different tokens without requiring a direct counterparty. Liquidity providers contribute tokens to these pools and, in return, earn fees from trades that occur within the pool.
Liquidity providers are incentivized to contribute equal proportions of both assets, receiving in exchange determinated rewards.
Example: Woofy has ETH and wants to swap it for SHIB. Thanks to the liquidity added by the people to the SHIB-ETH pool, Woofy will be able to add liquidity to the ETH end of the pair and withdraw an equivalent amount of SHIB.
What is concentrated liquidity?
In the latest version of ShibaSwap, we've introduced concentrated liquidity pools. This allows liquidity providers to focus their liquidity within a specific price range rather than distributing it evenly across the entire price curve. By concentrating liquidity, providers can use their capital more efficiently and potentially earn higher returns, as their funds are focused on price ranges where trades are more likely to occur.
Liquidity pools are pools of tokens locked in a smart contract on a DEX to facilitate trading. They provide the liquidity needed for users to swap between different tokens without requiring a direct counterparty. Liquidity providers contribute tokens to these pools and, in return, earn fees from trades that occur within the pool.
In traditional AMMs (Automated Market Makers), liquidity is spread across the entire price spectrum, from 0 to infinity, which can lead to inefficient use of capital since not all price ranges are equally probable. Concentrated liquidity solves this by letting providers allocate their funds to specific ranges, improving capital efficiency, increasing potential yields, and enhancing liquidity at key price points.
Example: In a traditional AMM, if a liquidity provider has $1,000 worth of assets, this amount would be spread across all possible prices, resulting in a low liquidity density. In a concentrated liquidity AMM, the same $1,000 can be concentrated within a narrower price range (e.g., $1,500 to $2,500 for ETH/USDC), providing higher liquidity density and potentially higher returns within that range.
What is an Liquidity Pool token?
An Liquidity Pool (Liquidity Provider) token is a token that represents a user's share in a liquidity pool on a DEX. When users deposit tokens into a liquidity pool, they receive Liquidity Pool tokens in return. These tokens can be used to reclaim their share of the pool, along with any earned fees or rewards
What are price ranges in the context of concentrated liquidity?
The price range refers to the minimum and maximum prices within which a liquidity provider operates.
Liquidity providers can specify the price range in which they want to provide liquidity. This means they can choose to allocate their assets within a certain price bracket, allowing them to manage their risk and potential returns more effectively.
For example, if a liquidity provider believes that the price of a particular cryptocurrency pair (e.g., ETH/USDC) will stay between $1,500 and $2,500, they can concentrate their liquidity within this range. If the price moves outside of this range, their liquidity will no longer be active.
You still can provide liquidity the old way without setting a price range. Select the Full range option for that.
What does In range / out of range means?
If your Liquidity Pools are in range that means you are earning rewards for the corresponding liquidity pool. If you are out of range then you are not. Your Liquidity Pools can go back in range by withdrawing and then readding your liquidity with an updated price range or wait for a price evolution to make your liquidity back in range again.