🛁Liquidity Pool
Last updated
Last updated
When you add liquidity to the pool, you will get LP tokens. A transaction fee of 0.2% or 0.1% (BUSD-USDT, USDC-USDT, and DAI-USDT pairs) will be charged when someone makes a token swap:
0.15% will be returned to liquidity providers as a fee reward out of 0.2%
0.075% will be returned to liquidity providers as a fee reward out of 0.1%
The liquidity pool will also allow you to stake your LP tokens to earn BSW tokens in the “Farms.” Hence, apart from earning income from token swap transactions, a user can stake LP tokens and earn BSW tokens.
For instance, if you add liquidity to $BNB / $BUSD, you will receive BNB-BUSD LP tokens. The number of LP tokens you receive represents your share in BNB-BUSD liquidity pool. You can always request the withdrawal of your funds by removing your liquidity.
Please note that when adding liquidity, you will need to have a sufficient amount of each token. Let’s say you want to add the following liquidity: 1 BNB / 308 BUSD. If you have less than 308 BUSD or less than 1 BNB, you will not be able to proceed. You need to have a sufficient amount of each token.
Keep in mind that providing liquidity is subject to impermanent loss and may carry certain risks. Ensure you know all the pros and cons of providing liquidity before taking action. You can learn more about impermanent loss by clicking here.
Liquidity pools pave the way for LPs to earn interest on their digital assets. By locking the tokens into a smart contract, users can earn a portion of the fees that are generated from trading activity in the pool.
The size of a user's share in the pool depends on how much of the underlying asset they have supplied. So, if a pool has $100 worth of assets and a user has supplied 10% of those assets, then that user would own 10% of the pool and earn 10% of the distributed rewards.
Fees you receive as a liquidity provider are added to your allocation in the liquidity pool.
Q: How can I calculate the earned fees?
A: Currently, it is impossible to do this on our website. You can do it with special services. Choose any convenient service with appropriate functionality
In the WBNB/BUSD pair above, we see these values:
Liquidity: $31.46M Volume 7D: $19.06M
Use the 7D volume to calculate the fee share of liquidity providers in the pool (based on the 0.15% trading fee structure): $19,060,000 (7D volume)*0.15/100 = $28,590 (7D LP Reward fees)
Next, use that fee share to estimate the projected yearly fees earned by the pool (based on the current 7D volume): $28,590 (7D LP Reward fees)*52.17 (number of weeks per year) = $1,491,540 (yearly LP Reward fees)
We can now use the yearly fees to calculate the LP rewards APR: ($1,491,540/$31,460,000) (yearly fees / liquidity)*100 = 4,741068023% (LP reward APR)
