Liquidity pools
Decentralized exchanges (DEXs) rely on automated market makers (AMMs) to power their swap functionalities. An AMM uses liquidity pools to automatically facilitate direct peer-to-peer trades. Liquidity pools consist of an equal value of two tokens in a trading pair. After each trade, the pool itself is automatically rebalanced, and the price per token is updated.
Providing liquidity is a moderately advanced feature and is not recommended for beginner users.
Providing liquidity
On ShibaSwap, users can provide liquidity and receive rewards for their participation as a Liquidity Provider (LP). To add liquidity to ShibaSwap and start earning rewards, simply navigate to the Liquidity Pools page.
From here, users can either select a pair from the table to add liquidity or click on the Create Pool button to provide additional liquidity to any existing pool or create a new one.
To add liquidity, simply select the two tokens you wish to add to liquidity and the amount.
Here is what you can find on the Liquitidy Pool creation page as seen above:
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Base token: This is where you select your base token for your liquidity pair. When on Ethereum, selecting ETH will automatically wrap it into WETH for the pool so you do not need to wrap it yourself. The same happens on Shibarium with BONE and WBONE.
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Second token: This is where you select the other token for your liquidity pair. This can be anything you like, meaning users can create their own custom pools at any time. To add to an existing pair, make sure you are importing the correct base token and second token!
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Liquidity info: How much the user is adding and unclaimed rewards.
Scrolling the page down, there are more useful features:
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Pool info: This is where information on the pool will be populated, including pool value, your share of the pool, and the comparative price of each token.
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TVL, volume and fees indicators and graphs for the given pair.
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Fee tier: Users can choose how much, in percentage, of swap fees that get distributed as rewards.
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Price range: The relative price range of the pair in which the user wants to concentrate its liquidity. He will earn rewards when the pair is in this range. There is the risk of impermanent loss if the price goes out of range.
Once the transaction is complete, you will be awarded NFTs representing your share of the liquidity pool. You are entitled to your proportional share of the pool which may change over time, potentially exposing the end user to impermanent loss.
You can always check this tutorial on how to add liquidity to a pool or watch the video demonstration below:
Don't see a pool you joined? Click the Import It button at the bottom of the page to import your SSLP tokens.
Migrate liquidity
You can easily migrate liquidity from V1 to V2. By doing that, you might have better options to manage liquidity and potentially can receive higher rewards. Just head to the Liquidity Pools page, choose the pair and click on the Migrate to V2 button:
You will then have access to V2 features, such as Fee tier and price range selection.
Watch the video below to see how it works:
Remove liquidity
To remove your liquidity, simply return to the Liquidity pools page, connect your wallet, and remove your liquidity by clicking the pair in the menu.
Watch the video below to see how it works:
Claiming rewards
Providing liquidity to a pool enables periodic rewards. Here is the flow to claim them. First, head to the Liquidity Pools page and click on Add Liquidity to reach the pair page.
In the top right-hand corner, choose Claim Rewards.
The rewards will be instantly displayed and available to be claimed by clicking on Claim Rewards.
Confirm the transaction, follow instructions on your wallet and your rewards should be transferred to your wallet.
You can also watch the video below to check how to claim rewards on ShibaSwap.
Holding NFT positions will allow the Liquidity Provider to earn their share of the fees generated by that trading pair. However, in the case of the Ethereum network, ShibaSwap also allows Liquidity Providers to receive reward tokens as an additional incentive. Rewards for providing liquidity are covered in detail on the Woof page of this wiki immediately following this page. Click the next page button below to learn about how to earn BONE rewards for providing liquidity.