Decentralized exchanges (DEXs) leverage automated market makers (AMMs) to enable seamless peer-to-peer trading. At the core of this system are liquidity pools, which consist of two tokens in a trading pair with equal value. These pools auto-rebalance after each trade, updating token prices dynamically.
👉 Note: Providing liquidity is an advanced feature and not recommended for beginners.
How to Provide Liquidity on ShibaSwap
To become a Liquidity Provider (LP) on ShibaSwap and earn rewards:
- Visit the Liquidity Pools page.
Select a pair from the table or click Create Pool to:
- Add liquidity to an existing pool.
- Create a new custom pool.
Key Components of the Liquidity Pool Page
- Base Token: The primary token in the pair (e.g., ETH auto-converts to WETH on Ethereum).
- Second Token: The paired token (can be any token).
- Liquidity Info: Displays your contribution and unclaimed rewards.
Additional Features:
- Pool Info: Shows pool value, your share, and token price comparisons.
- Analytics: TVL, volume, and fee graphs for the pair.
- Fee Tier: Choose the percentage of swap fees distributed as rewards.
- Price Range: Set the price range for concentrated liquidity (rewards are earned within this range).
⚠️ Risk Alert: Impermanent loss may occur if prices exit your selected range.
After completing the transaction, you’ll receive NFTs representing your pool share. These entitle you to a proportional share of the pool, which may fluctuate over time.
Tutorial: Learn how to add liquidity to a pool.
👉 Can’t find your pool? Click Import It at the bottom of the page.
Migrating Liquidity from V1 to V2
Upgrade to V2 features for better liquidity management and higher rewards:
- Navigate to the Liquidity Pools page.
- Select your pair and click Migrate to V2.
- Access advanced options like fee tiers and price range selection.
Removing Liquidity
To exit a pool:
- Return to the Liquidity Pools page.
- Connect your wallet.
- Select the pair and click Remove Liquidity.
How to Claim Liquidity Provider Rewards
LPs earn periodic rewards. Follow these steps to claim them:
- Go to the Liquidity Pools page and select Add Liquidity.
- On the pair page, click Claim Rewards (top-right corner).
- Confirm the transaction via your wallet.
Rewards are instantly transferred upon confirmation.
Additional Rewards for Ethereum LPs
On Ethereum, NFT positions entitle LPs to:
- A share of trading fees from the pair.
- BONE token rewards as extra incentives.
👉 Explore: Learn more about earning BONE on the next page.
FAQ Section
1. What is impermanent loss?
Impermanent loss occurs when the price of tokens in a liquidity pool diverges significantly from your initial deposit, potentially reducing your overall value.
2. How do fee tiers work?
Fee tiers determine the percentage of swap fees distributed to LPs. Higher tiers offer greater rewards but may attract more competition.
3. Can I create a custom liquidity pool?
Yes! Select any two tokens to create a new pool or add to an existing one.
4. What happens if I migrate to V2?
V2 unlocks advanced features like customizable fee tiers and price ranges, optimizing reward potential.
5. How often are rewards distributed?
Rewards accrue continuously and can be claimed manually at any time.
6. Are there risks to providing liquidity?
Yes, including impermanent loss and smart contract vulnerabilities. Always research before participating.