Liquidity Pools

Providing liquidity to GuacSwap pools gives you a reward in the form of trading fees when people use your liquidity pool to complete swaps.

Liquidity pools can be hard to understand, so here's a simplified breakdown: Assume you have a collection of toys you wish to exchange with your pals. Normally, you'd need to find someone who has the exact toy you're looking for and is prepared to trade with you. But what if you can't find the perfect individual with whom to trade?

This is where Guacamole liquidity pools come into play. They're similar to a large pool where everyone throws their toys (or, in this case, tokens) in. People can contribute their toys (tokens) to the pool in exchange for "pool tokens." The amount of pool tokens you get depends on how many toys you add to the pool. These pool tokens represent a portion of the overall toy pool that you have supplied!

These pool tokens (otherwise known as LP Tokens) will earn you rewards in the form of trading fees for supplying liquidity to pools and helping to ensure there is always liquidity to utilize.

Now, when you want to trade one toy for another, you don't have to find someone who has exactly what you want. You simply enter the toy (token) you are looking for and the program uses the pool to return a comparable amount given your input.

Swapping through an Automated Market Maker requires there to be liquidity pools in which the swap functions interact. You could compare this to a traditional exchange's order books, but in this case, liquidity for each token in the pool is set algorithmically in a curve depending on the current price of each token.

Providing Liquidity

  1. Navigate to the "Pools" or "Liquidity Pools" tab in the trading section of the Guacamole DEX.

  2. Select your desired liquidity pool to make a deposit.

  3. The pop-up will display asking for the amount of tokens you wish to add into the liquidity pool. You must add liquidity to the pool in the form of each supported token at a 1:1 ratio according to the current price. Entering the amount of one token should autofill the other necessary amount.

  4. Once you've selected your pool and the amount press the deposit button and ensure you approve the transaction in your connected wallet.

  5. You will see a confirmation for the transaction as a toast notification if successful. Refreshing the page and connecting your wallet will now show the pool as "Active".

  6. If you wish to reclaim your tokens + any earned yield, simply click the "Active" button and select the "Withdraw" tab on the pop-up. Then enter your desired amount to withdraw and approve the transaction in your connected wallet.

Yield Farms

Farms allow projects to offer extra token rewards to liquidity providers for helping to bootstrap liquidity. Each pool launches with built-in farms that support either Guacamole or the pool's main exotic token (another project token). These farms can then be filled with a number of tokens to help reward liquidity providers for helping to ensure there is ample liquidity in the pool to sustain trading.

Extra yield from live farms is added to the APR display calculations, however these tokens are separately claimable from the deposit menu when active.

Farms each have a set time run and token allocation with tokens being evenly distributed to participants when active according to liquidity deposit values.

Creating A New Pool

We are currently adding pools on request for reputable projects. Please open a support ticket in our Discord server to get started.

Tracking Total Liquidity

Information and public tracking of total liquidity on GuacSwap is available on several reputable apps.

Frequently Asked Questions

What is APY?

APY stands for annual percentage yield. The provided APYs on the liquidity pool interface serve as estimations of yield for each pool based on historical performance. It is important to note that this historical performance does not ensure future profits/performance.

Where does yield come from?

The yield displayed on pool cards comes from fees paid for swaps going through the pool and possible current yield farm emissions.

Can I withdraw liquidity at any time?

Yes, you can withdraw your position from any liquidity pool at any time. Just connect the wallet you made the deposit from, click the "Active" button, and then click the "Withdraw" tab.

Last updated