When you add your token to a Liquidity Pool you will receive Liquidity Provider (LP) tokens and share in the fees.
As an example, if you deposited LIL and BNB into a Liquidity Pool, you'd receive LIL-BNB LP tokens.
The number of LP tokens you receive represents your portion of the LIL-BNB Liquidity Pool.
You can also redeem your funds at any time by removing your liquidity.
Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool.
Whenever someone trades on Lillion DeFi, the trader pays a 0.20% fee, of which 0.19% is added to the Liquidity Pool of the swap pair they traded on.
- There are 10 LP tokens representing 10 LIL and 10 BNB tokens.
- 1 LP token = 1 LIL + 1 BNB
- Someone trades 10 LIL for 10 BNB.
- Someone else trades 10 BNB for 10 LIL.
- The LIL/BNB liquidity pool now has 10.019 LIL and 10.019 BNB.
- Each LP token is now worth 1.00019 LIL + 1.00019 BNB.
To make being a liquidity provider even more worth your while, you can also put your LP tokens to work whipping up some fresh yield on the LILFarms, while still earning your 0.19% trading fee reward.
Providing liquidity is not without risk, as you may be exposed to impermanent loss.