🏊♂️Liquidity Pools
Liquidity pools allow you to provide liquidity by adding your tokens to liquidity pools.
When you add your token to a liquidity pool, you will receive Liquidity Pool (LP) tokens.
As an example, if you deposited PHCF and BNB into a liquidity pool, you would receive PHCF-BNB LP tokens.
The number of LP tokens you receive represents your portion of the PHCF-BNB liquidity pool.
You can also redeem your funds at any time by removing your liquidity.
Providing liquidity is not without risk, as you may be exposed to impermanent loss.
It’s not all bad for liquidity providers as you will also be given a reward in the form of trading fees. For example, whenever someone trades PHC Finance, the trader pays a 0.25% fee, of which 0.17% is added to the liquidity pool of the swap pair they traded on.
For example:
10 LP tokens are representing 10 PHCF and 10 BNB tokens.
1 LP token = 1 PHCF + 1 BNB
Someone trades 10 PHCF for 10 BNB
Someone else trades 10 PHCF for 10 BNB .
The PHCF/BNB liquidity pool now has 10.017 PHCF and 10.017 BNB.
Each LP token is now worth 1.00017 PHCF+ 1.00017 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 Yield Farms while still earning your 0.17% trading fee reward.
Impermanent Loss
Providing liquidity is not without risk, as you may be exposed to impermanent loss.
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