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Liquidity Pools

Liquidity is the central cornerstone of any DEX. Users can only swap tokens if there is enough liquidity for the relevant trading pair β€” otherwise it will be difficult, costly or impossible to do so. Deep liquidity pools are crucial to enable token swapping for high-volume traders.

In return for providing liquidity you will receive TLP Tokens. TLP Tokens can be thought of as a receipt that represents your share of the liquidity you provided in the relevant LP. By holding TLP tokens you are automatically awarded trading fees generated by swaps made from other users on your specific trading pair.

You can also further maximize your APY when holding TLP tokens by locking them into our Asteroid Farms and start earning additional VOID rewards!

NOTE

Providing liquidity can yield great rewards, especially when combined with the incentivized Farms, yet it does come with the risk of impermanent loss. While not as scary as it sounds, it's worth learning about the concept beforehand β€” we suggest this explainer.

You may learn more about the relationship between LPs and Farms in this article.

TLP Tokens​

INFO

TLP Tokens receive their name from TangleSwap Liquidity Provider, since these tokens act as "receipts" for LPs at TangleSwap.

To add liquidity you will need to commit an amount of any token pair of your choice. The lowest value of either of the two tokens sets the limit for the maximum liquidity that you can provide. You can also easily swap any tokens if required for a given pair.

After depositing the same value (e.g. in USD) of a pair of two tokens into a liquidity pool, you will receive a corresponding amount of TLP tokens, which represent your proportional share as a member of the pool that you are participating in.

For example, if you deposit both VOID and IOTA worth $100 each, you'd receive in exchange VOID-IOTA TLP tokens equivalent to your portion of the VOID-IOTA Liquidity Pool.

You can also redeem your funds at any time by removing your liquidity.

Ah, and we almost forgot: moving funds in and out of liquidity pools has no fees of any kind. Absolutely zero!

Impermanent Loss​

Providing liquidity comes with inherent exposure to impermanent loss. It is important to get familiar with this concept before getting started β€” we promise it’s not as daunting as it sounds!

In simple terms, impermanent loss is the net difference between holding tokens in an AMM DEX or holding them in your wallet. Check out this great article by Binance Academy to learn more on why it happens, and how to account for it on your risk management.