ShibaSwap supports both v1 and v2 liquidity pools, allowing you to provide liquidity and earn rewards. While both versions let you earn trading fees, v2 offers advanced features like concentrated liquidity and NFT-based positions.
Providing liquidity is a moderately advanced feature. Start with small amounts and understand the risks before committing significant funds.

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What Are Liquidity Pools?

Liquidity pools are collections of two tokens that enable trading on decentralized exchanges. When you provide liquidity, you’re essentially becoming a market maker and earning a share of trading fees.

v1 Pools

  • Classic AMM pools
  • LP tokens represent your share
  • Fixed 0.3% fee structure
  • Simple to understand and use

v2 Pools

  • Concentrated liquidity pools
  • NFT positions represent your share
  • Multiple fee tiers (0.05%, 0.3%, 1%)
  • More capital efficient

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How Liquidity Pools Work

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Basic Concept

  • Equal Value: You provide equal dollar values of two tokens
  • Trading Fees: You earn a portion of all trading fees in the pool
  • Impermanent Loss: Token price changes can affect your position value
  • Rewards: Additional rewards may be available (BONE tokens on Ethereum)

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v1 vs v2 Comparison

FeatureShibaSwap v1ShibaSwap v2
Position TypeLP tokensNFT positions
Liquidity RangeFull price rangeCustom price ranges
Fee StructureFixed 0.3%Multiple tiers
Capital EfficiencyStandardHigher with concentration
ComplexitySimpleAdvanced
RewardsTrading fees + BONETrading fees + time bonuses

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How to Provide Liquidity

1

Navigate to Liquidity Pools

Go to the Liquidity Pools section on ShibaSwap.
You can access this from the main navigation menu.
2

Choose Your Version

Decide between v1 (simpler) or v2 (advanced):
  • v1: Click “Add Liquidity” for classic pools
  • v2: Click “Create Position” for concentrated liquidity
3

Select Token Pair

Choose the two tokens you want to provide liquidity for.
Make sure you have sufficient amounts of both tokens in your wallet.
4

Enter Amounts

Specify how much of each token you want to provide.
The interface will automatically calculate the required amounts to maintain equal value.
5

Configure Settings (v2 Only)

For v2 pools, set additional parameters:
  • Fee Tier: Choose 0.05%, 0.3%, or 1% fee pools
  • Price Range: Set the price range for your concentrated liquidity
  • Slippage Tolerance: Maximum acceptable price change
6

Review Pool Information

Check the details:
  • Your share of the pool
  • Estimated fees you’ll earn
  • Pool statistics (TVL, volume, fees)
  • Price range (v2 only)
7

Confirm Transaction

Review all details and confirm the transaction in your wallet.

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Understanding v2 Concentrated Liquidity

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What is Concentrated Liquidity?

Instead of providing liquidity across the entire price range, you can concentrate your liquidity within specific price ranges where you expect most trading to occur.
Concentrated liquidity allows you to provide the same amount of liquidity with less capital, potentially earning higher fees.

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Setting Price Ranges

  • Narrow Range: Higher fees but higher impermanent loss risk
  • Wide Range: Lower fees but lower impermanent loss risk
  • Current Price: Focus around current market price for maximum efficiency

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Fee Tiers

  • 0.05%: For stable pairs (USDC/USDT, etc.)
  • 0.3%: For most trading pairs (ETH/SHIB, etc.)
  • 1%: For exotic or volatile pairs

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Managing Your Positions

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Viewing Your Positions

  • v1: Check your LP token balance in your wallet
  • v2: View your NFT positions in the “My Liquidity Pools ” section

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Adding More Liquidity

  • v1: Use “Add Liquidity” with the same pair
  • v2: Use “Increase Liquidity” on your existing NFT position

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Removing Liquidity

  • v1: Use “Remove Liquidity” and burn your LP tokens
  • v2: Use “Decrease Liquidity” on your NFT position

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Collecting Fees

  • v1: Fees are automatically added to your position
  • v2: Manually collect fees using the “Claim Rewards” function

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Earning Rewards

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Trading Fees

You earn a portion of all trading fees proportional to your share of the pool:
  • v1: Fixed 0.3% of all trades
  • v2: Variable based on your chosen fee tier

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Additional Rewards (Ethereum)

On Ethereum, you can earn additional BONE tokens:
  • v1: Stake LP tokens in the “Woof” section
  • v2: Concentrated liquidity positions may earn time-based bonuses

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Fee Collection

  • v1: Fees are automatically compounded into your position
  • v2: Manually collect fees when you want to claim them

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Risks and Considerations

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Best Practices

1

Start Small

Begin with small amounts to understand how liquidity provision works.
2

Choose Stable Pairs

Pairs with correlated prices (like USDC/USDT) have lower impermanent loss risk.
3

Monitor Your Positions

Regularly check your positions and adjust if needed.
4

Understand Impermanent Loss

Learn about impermanent loss before providing significant liquidity.
5

Consider v2 for Efficiency

v2 offers better capital efficiency but requires more understanding.

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Common Scenarios

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I Want to Provide Basic Liquidity

  1. Choose v1 for simplicity
  2. Select a popular token pair (ETH/SHIB, USDC/USDT)
  3. Provide equal values of both tokens
  4. Earn trading fees automatically

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I Want Maximum Efficiency

  1. Choose v2 for advanced features
  2. Select appropriate fee tier
  3. Set price range around current market price
  4. Monitor and adjust as needed

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I Want to Earn BONE Rewards

  1. Provide liquidity on Ethereum (v1 or v2)
  2. For v1: Stake LP tokens in the “Woof” section
  3. For v2: Concentrated liquidity positions may earn bonuses
  4. Claim rewards regularly

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Troubleshooting

Transaction Failed

  • Check gas fees
  • Verify token approvals
  • Ensure sufficient token balance
  • Try again with higher gas

High Slippage

  • Try smaller amounts
  • Choose more liquid pairs
  • Wait for better market conditions

Position Not Showing

  • Refresh the page
  • Check correct network
  • Import position manually if needed

Low Fee Earnings

  • Check if position is in range (v2)
  • Monitor trading volume
  • Consider different fee tiers

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Migration from v1 to v2

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Why Migrate?

  • Better capital efficiency
  • More fee earning opportunities
  • Advanced features and controls

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How to Migrate

  1. Go to the Liquidity Pools page
  2. Find your v1 position
  3. Click “Migrate to v2”
  4. Follow the migration process
  5. Set your v2 parameters (fee tier, price range)
Migration is optional. You can continue using v1 if you prefer its simplicity.

Getting Started

Complete beginner’s guide to ShibaSwap.

Swap Tokens

Learn how token swapping works.

v2 Features

Advanced concentrated liquidity features.

Impermanent Loss

Understanding impermanent loss risks.
Liquidity provision is a great way to earn passive income while supporting the ShibaSwap ecosystem. Start small, learn the risks, and gradually increase your positions as you become more comfortable.