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