Liquidity FAQ

APRs (Annual Percentage Rates)

The APRs displayed on XenDEX are extrapolations of the pool and farm yields based on daily (by default), weekly, or monthly performance. These APRs are examples only, and it’s important to note that past performance does not guarantee future profits.

XenDEX employs three methods for estimating APR on its CLMM pools. Please refer to the relevant guide to understand how each method works.

Where does the yield come from?

APR Displayed on Pools: The yield shown on pools comes from:

  • Maker fees: Fees paid for swaps executed within the pool.

  • Reward emissions: Specifically for CLMM pools.

APR Displayed on Ecosystem Farms: The APR for ecosystem farms includes both maker fees and emissions from the farms.

Can I withdraw my liquidity at any time?

Yes, you can redeem your liquidity provider (LP) tokens for a proportional share of the pool at any time.

For standard AMM pools: If you have staked your LP tokens in a farm, you will need to unstake them first.

Constant Product Pools (CPMM)

What's the benefit for providing liquidity on traditional AMM pools?

Liquidity providers earn transaction fees from swaps that occur within the pool. Additionally, earnings from maker volume on the Open Book order book are also returned to liquidity providers in the corresponding pool.

When you add liquidity to a pool, you receive Liquidity Provider (LP) tokens, which represent your proportional share of the pooled assets. For example, if you deposit $DEX and $USDC into a pool, you will receive DEX-USDC LP tokens.

Each time a user swaps between $DEX and $USDC in the pool, a fee of 0.25% is charged. Of this fee, 0.22% goes back to the LP pool, while 0.03% is allocated to $DEX staking rewards.

For instance, if there were initially 100 LP tokens representing 100 USDC and 100 DEX, each token would be worth 1 USDC and 1 DEX. If a user trades 10 USDC for 10 DEX, and another user trades 10 DEX for 10 USDC, the pool could adjust to 100.022 USDC and 100.022 DEX. This means that each LP token is now valued at 1.00022 USDC and 1.00022 DEX when withdrawn.

Furthermore, if there is a farm associated with the tokens you are providing liquidity for, you have the opportunity to earn additional tokens.

If you're unfamiliar with the concept of impermanent loss, it's highly recommended to review resources that explain this phenomenon for a better understanding.

What are LP tokens?

Liquidity Provider (LP) tokens represent a proportional share of a liquidity pool. For example, if you contribute to the DEX-USDC pool, you will receive DEX-USDC liquidity pool tokens (LP tokens). Once you have deposited liquidity, these tokens will be visible in your wallet.

What are ecosystem farms?

Ecosystem farms are XenDEX's permissionless farms designed for traditional AMM pools. They enhance the decentralization of liquidity on the X1 blockchain by allowing any project team or user to create a farm and bootstrap liquidity by offering reward emissions on any pool.

How to check # of days of emission?

On the farm page, hover your cursor over the token symbol under pending rewards to view the reward period.

The farm owner has the ability to extend the reward period, but it cannot be shortened.

Why can't I find my LP tokens?

Your LP tokens can be found under the 'Standard' tab in the "My Positions" section of the portfolio page.

Are my LP tokens staked in farms still earning Fees?

Yes, the maker fees are compounded into the LP tokens.

Concentrated Liquidity Pools (CLMM)

What's the benefit for providing liquidity on CLMM pools?

Concentrated Liquidity Market Makers (CLMMs) on XenDEX provide advanced options for liquidity provision. Traditional liquidity pools use a "constant product" model, where liquidity is spread evenly across the entire price range from 0 to infinity. This broad distribution often leaves much of the liquidity inactive and not earning fees.

CLMMs allow liquidity providers (LPs) to focus their liquidity within specific price ranges, enabling them to concentrate liquidity where trading activity is highest. This targeted approach improves capital efficiency and increases liquidity around the current price, resulting in lower slippage on swaps.

By choosing specific price ranges for their assets, LPs can potentially earn higher yields, though with a greater risk of impermanent loss (IL). This model provides LPs with more control over their strategies, allowing them to take on varied risk levels depending on the desired exposure for each token pair.

How do I farm emission on CLMM pools?

No additional action is required! If there is an active farm associated with the CLMM pool, rewards will be distributed automatically alongside the maker fees.

Where are my LP tokens?

For CLMM pools, you won’t receive traditional LP tokens. Instead, you will receive a position NFT that represents your liquidity and the specific price range of your position in the pool.

If this NFT is burned or lost, the associated liquidity cannot be retrieved.

You can send or trade your position NFTs; however, if you sell them, any liquidity associated with those NFTs will also be transferred and will no longer be held by the original owner.

When you close a position and withdraw liquidity, the network fees for minting the NFT will be reimbursed.

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