Liquidity FAQ
What is the source of yield in DefAI liquidity pools?
Yields in DefAI pools are generated from two main sources:
Trading Fees: These are the fees collected from swaps that utilize the pool, rewarding those who provide liquidity.
Reward Emissions: For our Concentrated Liquidity Market Maker (CLMM) pools, additional rewards are issued to liquidity providers.
For ecosystem farms on DefAI: The yields comprise both the trading fees and the rewards distributed through farm emissions.
Can I withdraw my liquidity anytime on DefAI?
Absolutely. You can withdraw your portion of the liquidity pool whenever you choose. For standard Automated Market Maker (AMM) pools, remember to unstake your LP tokens from any farm first to redeem them.
What are the benefits of providing liquidity on DefAI's traditional AMM pools?
By providing liquidity, you earn a portion of the transaction fees generated by swaps in the pool. On DefAI, any trading fees collected are shared with liquidity providers according to their stake in the pool, enhancing your potential returns. Additionally, if you join a farming opportunity with your LP tokens, you can accumulate even more rewards.
What are Liquidity Provider (LP) tokens?
LP tokens signify your share in a liquidity pool. For example, if you contribute to a SOL-USDC pool on DefAI, you'll receive LP tokens that correspond to your investment. These tokens are visible in your wallet and can be used to reclaim your share of the pool.
What are ecosystem farms on Trader AI?
Ecosystem farms are innovative, permissionless farming opportunities created for traditional AMM pools. They promote liquidity decentralization by allowing any user or project to initiate a farm, thereby fostering liquidity through reward incentives.
How do I know how much time is left for reward emissions on a farm?
On DefAI, you can hover over the token symbol in the farming section to see the remaining reward period. Farm owners can extend this period to continue the incentive.
Do my staked LP tokens in farms continue to earn fees?
Yes, while staked in farms, your LP tokens still accumulate trading fees, which are compounded into their value.
What happens if there's a price change after I provide liquidity?
If the market price moves significantly, it could impact the value of your LP tokens due to 'impermanent loss.' As prices fluctuate, the ratio of assets in the pool changes, which might affect your position's value when you decide to withdraw.
Can I provide liquidity with any cryptocurrency on DefAI?
DefAI supports a broad range of cryptocurrencies. However, each liquidity pool may require specific tokens. Please check the requirements for each pool before you decide to provide liquidity.
Is there a risk to providing liquidity on DefAI?
Like all investments, providing liquidity comes with risks, including market volatility and impermanent loss. We advise all our users to understand these risks fully before participating in liquidity provision.
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