Liquidity Pool

Provide Liquidity to faciliate trades

What Are Liquidity Pools?

Liquidity Pools serve as repositories where tokens, often referred to as liquidity, are pooled. This setup enables users to execute trades in a decentralized and permissionless manner. When supplying liquidity to these pools, the amount must be evenly distributed between two tokens: the primary token and the base token. BaseSwap's liquidity pools enable users to supply liquidity. In return for doing so, they are awarded BLP tokens (BaseSwap Liquidity Provider tokens) as evidence of their contribution. For instance, if a user deposits $BSWAP and $ETH into a pool, they would be issued BSWAP-ETH LP tokens. These tokens denote a proportional stake in the pooled assets, ensuring users can retrieve their assets whenever they wish.

Whenever liquidity is added to a pool, specific tokens, termed as liquidity tokens, are minted and forwarded to the provider's address. These tokens signify the particular contribution of a liquidity provider to that pool.

The amount of liquidity tokens a provider receives is determined by the proportion of the pool's liquidity they supply. If the provider is creating a new pool, the number of liquidity tokens they will obtain is given by the formula: sqrt(x * y), where x and y are the quantities of each token contributed.