Contributors can earn up to 0.3% trading fees from the liquidity they've put in. Adding liquidity allows you to receive incentives. If you lock your liquidity at farms, you can get extra rewards in KDX.
You will receive KLP tokens (KAIDEX Liquidity Provider tokens) as proof of contribution once you have provided liquidity. A user that puts $KDX and $KAI into a pool, for example, would receive KDX-KAI KLP tokens. These tokens reflect your share of assets within the pool. You can always withdraw your funds by removing your liquidity.
You must provide the liquidity pool with tokens in a 1:1 value ratio. This means that if you're adding to a KDX-KAI pool, and wish to put in a total amount of 1000 KAI in liquidity, you'll need to first convert half of the fund to an equal amount of KDX tokens (value equivalent to 500 KAI).
If the pool you wish to provide liquidity to does not exist, you can create it of course! As the first liquidity provider, you set the initial exchange ratio (price) if one of the tokens in the pair has not appeared on KAIDEX. This often quickly corrects itself through arbitrage and by more liquidity providers adding to the pool.
By adding liquidity, you are putting equal USD value of 2 ingredients to make LP tokens. Here's how to do it:
- Crypto native wallet
- Some KAI (less than 1 cent) for gas
Just a friendly reminder that providing liquidity is subject to impermanent loss and includes some risks. Have a good understanding all of the benefits and drawbacks of providing liquidity before you ape in. Click here for additional information on impermanent loss.