Liquidity Pools

When you add your token to a Liquidity Pool you will receive Liquidity Provider (LP) tokens and share in the fees.

LP Tokens

As an example, if you deposited NewToken and Omax into a Liquidity Pool, you'd receive NewToken-Omax LP (OSWAP-V2) tokens. Each liquidity pool has its contract address, so you can import it to your wallet and see you LP tokens. You will need to approve tokens to the router contract before adding liquidity.

The number of LP tokens you receive represents your portion of the Liquidity Pool.

You can also redeem your funds at any time by removing your liquidity.

Adding liquidity

Liquidity Providers earn trading fees

Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool.

Whenever someone trades on OmaxSwap, the trader pays a 0.3% fee, of which 0.25% is added to the Liquidity Pool of the swap pair they traded on.

For example:

• There are 10 LP tokens representing 10 NewToken and 10 Omax tokens.

• 1 LP token = 1 NewToken + 1 Omax

• Someone trades 10 NewToken for 10 Omax.

• Someone else trades 10 Omax for 10 NewToken.

• The NewToken/Omax liquidity pool now has 10.025 NewToken and 10.025 Omax.

• Each LP token is now worth 1.0025 NewToken + 1.0025 Omax.

Impermanent Loss

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