Liquidity is the core of DEX. Without liquidity, traders would not be able to swap tokens. Without sufficient liquidity, traders would suffer large price impact/slippage.
Anyone can add liquidity to the liquidity pools, there is no minimum amount requirement. When you add liquidity to the liquidity pools, you will receive the corresponding LP tokens. For example, if you add liquidity to the BNB/MODO pool, you will receive the BNB/MODO LP token.
You can find a step-by-step tutorial on how to add liquidity on the below page.
Users who add liquidity are called Liquidity Providers (LP)LP will receive Liquidity Pool Tokens (LP Tokens) when they add liquidity to the pools
LPs get rewarded for providing liquidity to the pools:
- Whenever someone is swapping between the tokens you are providing liquidity to, 0.24% of the trade volume for each trade will be added to the liquidity pools for LPs to share the fee compensation.
- LP tokens you receive can be used to stake in Yield Farming to receive daily MODO tokens.
Providing liquidity is not without any risk. Understanding Impermanent Loss is crucial for LPs. For a detailed explanation on Impermanent Loss, please go to the below page:
LPs can remove liquidity anytime they want, the process of removing liquidity is to burn the LP tokens and redeem the corresponding amount of tokens.
See a step-by-step tutorial on how to remove liquidity on the below page: