💸Protocol Earnings

Liquidity Provision on Kim DEX

  1. What is Liquidity Provision?

    • Liquidity provision involves depositing a pair of tokens into a pool to facilitate trading on the platform.

    • By providing liquidity, users contribute to the overall health and efficiency of the exchange.

  2. Benefits for Liquidity Providers

    • Liquidity providers earn a portion of the transaction fees generated from trades in the pool.

    • They play a crucial role in ensuring enough liquidity for smooth trading operations.

Swap Fees APR (Annual Percentage Rate)

  1. Understanding Swap Fees

    • Each swap (trade) on Kim DEX incurs a transaction fee of 0.3%.

    • This fee is a key revenue source for liquidity providers.

  2. Distribution of Swap Fees

    • The entirety of the 0.3% transaction fee is distributed directly to the providers of the liquidity pool involved in the swap.

    • This distribution is proportional to each provider's share in the pool.

  3. APR Calculation

    • The Annual Percentage Rate (APR) for liquidity providers is calculated based on annualized total fees earned from swaps.

    • This rate represents the potential earnings a liquidity provider can expect over a year based on current trading volumes and fee structures.

Critical Considerations for Earning Through Liquidity Provision

  1. Pool Selection: Consider the trading volume and token stability factors when choosing liquidity pools.

  2. Risk Assessment: Be aware of impermanent loss, especially in volatile market conditions.

  3. Active Management: Regularly monitor and adjust your liquidity provision strategy to optimize earnings.

Participating in liquidity provision on Kim DEX offers a compelling opportunity to earn from swap fees. For v4 pools, fees are adaptive based on the volatility of the pair and ranges from 0.01% - 1.5%. For v2 pools, 0.3% transaction fee on swaps, entirely allocated to liquidity providers, is an incentive for contributing to the platform's liquidity. By understanding the dynamics of swap fees APR and selecting suitable pools, users can effectively earn passive income while supporting the ecosystem of Kim DEX. Consider the associated risks and manage your investments actively for the best results.

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