Pools and liquidity
Every swap needs a pool on the other side. Liquidity providers (LPs) fill those pools with two tokens and earn a share of the swap fees in return. Here's how it works and how to do it.
V2 or V3?
LitVMSwap has two kinds of pools. Both are fine, they just suit different people.
| V2 (classic) | V3 (concentrated) | |
|---|---|---|
| Price range | All prices, always | You pick a range |
| Effort | Set and forget | Check on it now and then |
| Earns fees | Always, a share of every swap | Only while the price is inside your range |
| What you hold | LP tokens | An NFT for your position |
| Good for | Getting started, long-term holders | People who want more from the same capital |
Not sure? Start with V2. You can always try V3 later.
Add liquidity
Open Pools
Go to Pools and connect your wallet.
Choose the pair
Pick the two tokens. For V3, also pick the fee tier: 0.05% for pairs that move together, 0.3% for most pairs, 1% for very volatile ones.
Set the amounts
Type one amount and the other fills in to match the current price. Pools need both sides in the right ratio.
For V3: pick a range
Narrow range: more fees while the price stays inside, nothing while it's outside. Wide range: steadier, smaller share. Full range behaves like V2.
Approve and confirm
Approve each token the first time, then confirm the deposit. Your position shows up under your positions and in your Portfolio.
Managing and removing
- V2: remove some or all of your liquidity any time. You get both tokens back at the current pool ratio, swap fees included.
- V3: open your position to add more, collect the fees you've earned, or remove liquidity. Collecting fees doesn't touch your position.
The honest bit: impermanent loss
When prices move, a pool rebalances your two tokens. If one token pumps, you end up holding less of it than if you had just held it. That gap is called impermanent loss. Swap fees can make up for it, but not always.
Providing liquidity isn't a savings account. Prices move, pools can be drained of one side, and new tokens can go to zero. Fee income is never guaranteed.
Tips
- An out-of-range V3 position earns nothing. Worth a peek when the market moves a lot.
- Brand new pool? You set the starting price. Double check it, because the first trades will arbitrage a wrong price right away.
- Keep a little zkLTC for gas, both for adding and for removing later.