V2 (coming soon)

V2 liquidity provision represents the traditional approach to providing liquidity on decentralized exchanges. Here's a closer look at what V2 entails:

Overview

V2 liquidity provision involves liquidity providers depositing equal amounts of two assets into a liquidity pool, enabling the exchange to facilitate trades seamlessly.

Key Features

1. Equal Allocation of Assets: Liquidity providers contribute an equal value of both tokens to the liquidity pool, ensuring balanced liquidity for the trading pair.

2. Fee Structure: Liquidity providers earn a share of the trading fees generated by the liquidity pool. In the case of Swamps DEX, 0.4% of the trading fees go to liquidity providers.

3. Impermanent Loss: Liquidity providers are exposed to impermanent loss, which occurs when the relative prices of the tokens in the liquidity pool change compared to when they were deposited.

Considerations

• Impermanent Loss Risk: Liquidity providers should be aware of the potential for impermanent loss, which can impact the value of their assets compared to holding them.

• Balanced Exposure: V2 liquidity provision offers balanced exposure to both assets in the liquidity pool, making it suitable for traders seeking a straightforward approach to providing liquidity.