After the BIST Token launch, liquidity needs to be provided for the trading pair ETH/BIST. We will be providing part of this liquidity, but we need your help with that as well. You’ll have the option to earn additional BIST rewards if you do so!
I’ve claimed my tokens, what is UniSwap Liquidity Providing?
With the distribution of BIST taking place on 16th May 10:00 UTC, providing liquidity on the UniSwap ETH/BIST pool is now an option for token holders. In this blog we will lay out the fundamentals of providing liquidity on UniSwap, and what it means for BIST holders.
It is common practice to reward early Liquidity Providers (LP’s) on UniSwap (v2) with additional tokens through UniSwap LP tokens and staking. Specifics of our staking program are detailed in the upcoming blog.
What is UniSwap & Liquidity Providing?
UniSwap is a decentralized exchange built upon the Ethereum mainnet. The exchange operates through Liquidity Pools. A Pool is provided with liquidity by depositing proportionate amounts of both tokens in a trading pair. People who add liquidity to a pool are called Liquidity Providers (LP’s).
Whenever liquidity is deposited into a pool, unique tokens known as liquidity tokens (or LP tokens) are minted and sent to the provider’s address. These tokens represent a given liquidity provider’s contribution to a pool. The proportion of the pool’s liquidity provided determines the number of liquidity tokens the provider receives in their linked wallet. In the case of BIST these will be named BIST/ETH LP tokens. Through this process UniSwap (v2) allows additional rewards for LP’s through a mechanism called Liquidity Staking. Our BIST program will be detailed in our upcoming blog.
By default on UniSwap, every provider of liquidity additionally receives a ratio of the 0,3% trading fees, for each trade occurring on the pair they provided liquidity for.
I have read up on liquidity providing on UniSwap, how does it work for BIST?
While we commit to providing sufficient liquidity early on, it is very important for our community to be able step in and contribute as well.
The Process
- Go to Uniswap, connect your wallet, and click ‘Pool’ on the top menu. Then, click ‘more’ and select ‘V2 Liquidity’.
**Click ‘more’ and select ‘V2 Liquidity’**
2. Click ‘Add V2 liquidity’ and select the ETH/BIST pair by selecting it in the list or adding it manually by entering the smart contract address under ‘Manage’ tokens. Direct link to the pool: https://app.uniswap.org/#/add/v2/0x6e8908cfa881c9f6f2c64d3436e7b80b1bf0093f/ETH
BIST CONTRACT ADDRESS: 0x6e8908cfa881C9f6f2C64d3436E7b80b1bf0093F
Fill in the desired amount of ETH or BIST to specify the amount you want to contribute to the liquidity pool and click ‘supply’.
3. Click on ‘supply’ and confirm the liquidity deposit per your specifications by signing the transaction in your wallet.
When the transaction has been processed, you will have now supplied your desired amount of ETH/BIST liquidity to the UniSwap V2 pool.
The risk for Liquidity Providers — Impermanent Loss
When providing liquidity into pools there’s always the risk of Impermanent Loss to consider.
Impermanent loss refers to a situation where you end up withdrawing less USD value from the pool than you would have had if you didn’t add liquidity and simply HODL’d the tokens in your wallet instead.
It occurs when the price of one of the assets you provided increases a lot compared to the other asset in the pair. When this happens, LP’s are left with relatively more tokens that have lost in value, and less tokens that have gained in value. It is called impermanent because the balance might return in your favor. It becomes permanent when you take out your liquidity from the pool. Refer to this blog for mathematical examples.
To compensate for Impermanent Loss risk, the UniSwap trading fees should be taken into account, and also the additional rewards through Liquidity Staking programs.
Happy trading!
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