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 CHIMPY and BNB into a Liquidity Pool, you'd receive CHIMPY-BNB LP tokens.
The number of LP tokens you receive represents your portion of the CHIMPY-BNB Liquidity Pool.
You can also redeem your funds at any time by removing your liquidity.
Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool.
Whenever someone trades on ChimpySwap, the trader pays a 0.25% fee, of which 0.17% is added to the Liquidity Pool of the swap pair they traded on.
- There are 10 LP tokens representing 10 CHIMPY and 10 BNB tokens.
- 1 LP token = 1 CHIMPY + 1 BNB
- Someone trades 10 CHIMPY for 10 BNB.
- Someone else trades 10 BNB for 10 CHIMPY.
- The CHIMPY/BNB liquidity pool now has 10.017 CHIMPY and 10.017 BNB.
- Each LP token is now worth 1.00017 CHIMPY + 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 CHIMPY Yield Trees, while still earning your 0.17% trading fee reward.
Providing liquidity is not without risk, as you may be exposed to impermanent loss.