Other guides👇
What are liquidity pools and how do they work 🤔?
Liquidity pools are needed for automated trading on DEX. Liquidity providers supply liquidity to the pools after which this liquidity is used for trading📊.
For example on DEX STON.fi there is a NOT/TON pool if you provide liquidity to this pool you become a liquidity provider. And if someone swaps tokens in this pair NOT➜TON or TON➜NOT they will use your liquidity and pay a fee💸 and part of these fees you will receive.
Impermanent loss😓
Impermanent loss occurs if from the moment you provided liquidity to the pool the assets have changed their value significantly relative to each other .
For example you provided liquidity to the NOT/TON pool and NOT went up or down 2 times while TON didn’t change its value in that case you will lose 5.72% of your assets. If NOT returns to its previous value the impermanent loss will disappear.
If the assets move in opposite directions for example NOT drops📉 and TON rises📈 then the impermanent loss will increase even faster. But if they rise or fall together impermanent loss will not occur.
To clearly understand how much you can lose due to impermanent loss try the impermanent loss calculator from STON.fi. In Google search: «STON.fi impermanent-loss-calculator».
Impermanent loss cannot occur in liquidity pools with equally valued assets in the pair. For example: tsTON/TON, USDe/USDT.
