DEXs liquidity provision
Governance > IDLE token > Use-cases > Liquidity provision
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Governance > IDLE token > Use-cases > Liquidity provision
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A liquidity pool is a core mechanism of AMM (Automated Market Makers), where at least two assets are deposited to form a trading pair. Whenever liquidity is deposited into an AMM pool, specific tokens known as liquidity providers tokens (LP tokens) are minted and sent to the provider’s address. The proportion of the pool’s liquidity provided determines the number of liquidity tokens the provider receives, and so by staking your LP tokens into the Idle LP Staking Program, Liquidity Providers are entitled to receive additional rewards in the form of IDLE.
Risks: Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Sushiswap.
Uniswap is another AMM pool, similar to Sushiswap, where $IDLE token holders can provide liquidity into the pool trading pair of your choice (e.g., IDLE-ETH, IDLE-DAI, etc.). Currently, Uniswap has a V2 and a V3. On Uniswap V3, as the Liquidity Provider, you can concentrate on the liquidity price range you would like to provide liquidity for.
Risks: Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Uniswap.
Balancer is an Ethereum-based Automated Market Maker (AMM) protocol that functions as a decentralized exchange (DEx) and a “self-balancing” portfolio management tool. Balancer's AMM provides traders with liquidity for their ERC-20 tokens.
Risks: Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Loopring.
If you are using the Polygon network, you can provide liquidity on Sushiswap. Providing liquidity on the Sushiswap-Polygon AMM works exactly as it does on the Ethereum mainnet, with similar benefits and risks.
Risks: Impermanent Loss and smart contract risk are the concerns to be aware of when providing liquidity at Sushiswap.
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Insurance: for SLP tokens covering contract bugs, economics attacks, or governance attacks.
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Insurance: for Uniswap LP tokens covering contract bugs, economics attacks, or governance attacks.
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