Liquidity Pools and Adding Liquidity

PureSwap liquidity pools allow you to provide liquidity by adding your tokens to liquidity pools or “LPs”.

When you add your token to a liquidity pool (LP), you will receive PLP tokens (PureSwap’s version of liquidity provider tokens). As an example, if you deposited $PURE and $MX into a liquidity pool, you would receive PURE-MX PLP tokens. The number of PLP tokens you receive represents your portion of the PURE-MX liquidity pool. You can also redeem your funds at any time by removing your liquidity.

Providing liquidity is not without risk, as you may be exposed to impermanent loss. It’s not all bad for liquidity providers as you will also be given a reward in the form of trading fees. Whenever someone trades PureSwap, the trader pays a 0.3% fee, of which 0.2% is added to the liquidity pool of the swap pair they traded on.

For example:

There are 10 PLP tokens representing 10 PURE and 10 MX tokens.

1 PLP token = 1 PURE + 1 MX

Someone trades 10 PURE for 10 MX.

Someone else trades 10 MX for 10 PURE.

The PURE/MX liquidity pool now has 10.017 PURE and 10.017 MX.

Each PLP token is now worth 1.00017 PURE + 1.00017 MX.

To make being a liquidity provider even more worth your while, you can also put your PLP tokens to work whipping up some fresh yield on the PURE farms, while still earning your 0.2% trading fee reward.