What is Liquidity Providing?
A breakthrough invention in DeFi ðŸ§
Liquidity providers deposit tokens into a smart contract so YOU can make swaps.
In exchange, they earn rewards.
This simple idea transformed the way markets work, bringing economic freedom to internet users around the world.
Here’s why it matters 👇
2/ Why liquidity providing matters
Liquidity providing makes it possible for anyone to:
• Swap tokens outside of centralized exchanges
• Access new kinds of markets
• Generate yield on your crypto
• Trade lesser-known assets
• Support protocols you believe in
Every time you make a swap on Katana, you’re relying on a liquidity provider!
Here’s how to BECOME one – and earn rewards 👇
3/ How to provide liquidity
Step 1: Go to a DEX like Katana
Step 2: Deposit a pair of tokens in a liquidity pool
Step 3: Receive Liquidity Provider (LP) tokens representing your contributions
Step 4: Earn rewards every time someone uses your liquidity pool to swap those tokens
4/ Things to think about when providing liquidity
DeFi rewards always come with risk, including:
• Impermanent Loss: auto-rebalancing pools can reduce your rewards
• Smart Contract Vulnerability: bugs and bad actors can affect liquidity pool safety
• Market volatility: yields and prices are always subject to change
Want to learn more?
Check out the Ronin Wiki 👇
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