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 CK and BNB into a Liquidity Pool, you’d receive CK-BNB LP tokens.
The number of LP tokens you receive represents your portion of the CK-BNB Liquidity Pool.
You can also redeem your funds at any time by removing your liquidity.
Liquidity Providers earn trading fees
Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool.
Whenever someone trades on CK Finance, the trader pays a 4% fee, of which 3% is added to the Liquidity Pool of the swap pair they traded on.
- There are 10 LP tokens representing 10 CK and 10 BNB tokens.
- 1 LP token = 1 CK + 1 BNB
- Someone trades 10 CK for 10 BNB.
- Someone else trades 10 BNB for 10 CK.
- The CK/BNB liquidity pool now has 10.3 CK and 10.3 BNB.
- Each LP token is now worth 1.3 CK + 1.3 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 CK Farms, while still earning your 3% trading fee reward.
Providing liquidity is not without risk, as you may be exposed to impermanent loss.