This guide will discuss what an Automated Market Maker(AMM) is and how to become a Liquidity Provider (LP) on Proton Swap.
- You will need to create an account and complete verification, depending on your country of residence. For details, check out this guide.
We'll start with the basics. If you're familiar with LP's and AMM's, you can skip to the "Let's get started" section below.
What is an AMM?
- Proton Swap is a decentralized exchange that uses an Automated Market Maker, or AMM. An AMM is a system of smart contracts that enables permission-less cryptocurrency swaps between assets without centralized entities. Our AMM executes swaps instantly and you never have to worry about setting the correct gas fee or worrying about order failure due to gas fee spikes.
What is a Liquidity Pool? How does an LP help with liquidity?
- If there are no centralized market makers in an AMM like Proton Swap, where does the liquidity for the market come from? The short answer is: from people like you and the crypto community!
- Market participants that deposit funds into the AMM pool are called Liquidity Providers, or "LP". You can become an LP with as little as $1. Because the AMM requires liquidity in both the Sell-side and Buy-side of order to complete a swap, deposit must start with an equivalent monetary amount in each cryptocurrency.
- For example, If you are providing liquidity for the XPR/XUSDC pair, you’ll want to have an equivalent amount of XPR and XUSDC. So for 300 XPR, you’ll want an equivalent amount of XUSDC, which is about $1.73. We'll show you a real example below.
- Here's the best part, LP's earn a fee of 0.2% on deposited swap pairs! it's a great way to enhance your return on idle deposits.
- There is absolutely no fee to enter or exit a Liquidity Provider position (yes, no gas fees!).
Let’s get started
Navigate to Protonswap.com/pool
Click on the “Connect Wallet” button on the top right corner of the page and select Proton Wallet from the list.
- You will need to grab your mobile device at this stage. Open the Proton Wallet app and follow the on-screen prompts to scan the QR code and authorize access.
- You can confirm your Proton Wallet app is connected to protonswap.com when you see your account name appear in the top right hand corner of the webpage.
- Ok, now you are ready start providing liquidity. Select the two pairs you would like to provide liquidity for.
- Enter the amount you would like to deposit as liquidity into Input 1, the reciprocal deposit amount for the second coin will be generated in Input 2.
- Your balance for the selected cryptocurrency will be displayed right above the coin selection dropdown.
- Click "Add Liquidity" button once you are happy with the selection and amount.
ℹ️ Not all pairs are available at this time. The "Add Liquidity" button will display "No Pool Available" if the pair is not supported.
- Once the transaction is initiated, a popup will be presented that requests a review of the transaction on your mobile device.
- Switch to your mobile device, open the Proton Wallet app and provide the required authorization to complete the transaction. You will also have an opportunity to review details of the transaction before confirming.
- That's it! Your active LP positions will be displayed at the bottom of the Pool website. You can use the slider to adjust the quantity or exit the LP at any time! And yes, you guessed it. Absolutely no gas fees to close the position!
If you have any questions about this guide or just want to say “Hi”, you can always reach us here.