Adding Liquidity
XenDEX’s liquidity pools enable anyone to provide liquidity by adding assets to a pool, earning fees from trades within the pool.
How to Add Liquidity to a Pool
1️⃣ Access the Liquidity Pool Section
Select ‘Pool List’ from the navigation menu.
2️⃣ Choose a Pool
Connect your wallet and search for a pool by entering a token mint/pool address or ticker in the search bar or browse the list of available pools.
Click ‘Deposit’ on the pool you wish to join.
3️⃣ Select Tokens and Add Liquidity
Choose the tokens you want to contribute. Liquidity must be added in a 1:1 USD value ratio to maintain pool balance and ensure smooth trades.
Enter the amount for the first token; the second token amount will auto-adjust to match the ratio.
Click ‘Supply’ and approve the transaction in your wallet.
4️⃣ Confirmation and LP Tokens
After confirming the transaction, you’ll receive Liquidity Provider (LP) tokens, representing your share of the pooled assets.
5️⃣ Optional: Stake LP Tokens
If the selected pool offers farming rewards, click ‘Stake’ to deposit your LP tokens and earn additional rewards from farming programs.
How to Manage Your Liquidity
1️⃣Navigate to Portfolio
Go to the ‘Portfolio’ page.
2️⃣ Manage Your Position
To reclaim tokens or increase your position, choose the desired action and confirm the transaction.
Understanding Liquidity Pools and LP Tokens
🔹 LP Tokens: When you add assets to a pool, you receive LP tokens (e.g., DEX-USDC LP tokens if you deposited DEX and USDC). These tokens represent your proportional share of the pool and can be redeemed at any time for the underlying assets.
🔹 Earning Fees: Each trade in the pool incurs a 0.25% trading fee, distributed as follows:
Liquidity Providers (LPs): 0.21% (84%)
Returned to the LP pool, increasing the value of LP tokens.
Governance Token Buybacks: 0.03% (12%)
Used to buy back and burn $DEX tokens, reducing circulating supply and enhancing token value.
Protocol Treasury: 0.01% (4%)
Directed to support protocol development, security audits, marketing, and operational expenses.
Example
If there are 100 LP tokens representing 100 DEX and 100 USDC, each LP token is initially worth 1 DEX and 1 USDC. After trades increase the pool balance to 100.022 DEX and 100.022 USDC, each LP token would now be worth 1.00022 DEX and 1.00022 USDC when withdrawn.
Note on Impermanent Loss
Impermanent loss occurs when the value of your deposited tokens changes relative to when you added them to the pool. This can lead to lower returns compared to holding the tokens directly. Learn more about impermanent loss here.
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