Deposit Liquidity
Last updated
Last updated
Anyone can deposit tokens to liquidity pools to become a liquidity provider on SyncSwap and start to earn trading fees from the liquidity.
By providing liquidity, you will receive Liquidity Pool (LP) tokens. These LP tokens track pro-rata shares of the pool reserves and can be redeemed for the underlying assets at any time.
SyncSwap protocol will charge a trading fee for all trades. The trading fee is 0.1% for Classic pools, where the liquidity providers collect 0.07%, and the protocol collects 0.03%.
That means liquidity providers will earn 0.07% of all trades in the pool. For example, in a trade of 100,000 USDC, 70 USDC are added to the liquidity pool and can be collected by liquidity providers.
While earning trading fees, providing liquidity does come with the risk of impermanent loss.
Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.
WETH is a special version of ETH that has more capabilities. And USDC/ETH and USDC/WETH are the same pool. You can choose either ETH or WETH to collect when withdrawing from the pool.
