🥃Liquidity Pools

When user’s provide liquidity in Ray Dex, they will be given LP token which can be used for earning additional reward.

Ray Dex charges 0.20% fee for all trades, of which 0.15% is added to the liquidity pool of the token pair that was traded on.

In other words, a liquidity pool (LP) is a pool of two tokens, e.g. PLS and RDX tokens. This pool is what allows users to exchange between the two tokens automatically without counter party risk or middlemen.

Users can earn a share of the trading fees by depositing a pair of tokens into the LP (also known as "adding liquidity"). Users will receive an Ray LP token, representing their share of the LP.

When a user adds liquidity to a pool, the protocol generates yield. You earn 0.20% of all trades on this pair in proportion to your pool share. Fees are added to the pool in real-time, accumulate, and can be reclaimed when you withdraw your liquidity.

When you exit the liquidity pool, your share of the trading fees accrued over time will be paid. Providing liquidity is not without risk, since you may incur impermanent loss, but if the values of the two tokens revert to their original levels after you add liquidity, you will not incur any impermanent loss.