Liquidity Providers

Owning and providing liquidity to XChains liquidity pools.

Liquidity owners own their private pools and also provide assets to the liquidity pools. They are the only one who can interact with the pools. Each owner has access to his/her own pool on each chain only.

They are compensated with swap/transfer fees and system rewards. Compensation is affected by a number of factors related to the pool and the state of the network.

Rewards

Liquidity providers deposit their assets in their private liquidity pools and earn yield in return. They earn tokens in 9CP and the pool's connected asset. For example, someone who has deposited BTC in their pool will receive rewards in BTC and 9CP.

Yield is calculated for liquidity providers every block. Yield is paid out to liquidity providers when they remove assets from the pool.

Rewards are calculated according to whether or not the block contains any swap/bridge transactions.

• If the block contains swap/bridge transactions then the amount of fees collected per pool sets the amount of rewards.

• If the block doesn't contain trades then the amount of assets in the pool determines the rewards.

Factors Affecting Yield

Trade Volume – Higher trade volumes lead to higher fees. Higher fees lead to higher rewards for liquidity providers.

Size of Trades – Swappers/bridgers who are in a hurry to exchange/transfer assets will tend to make larger trades. Larger trades lead to greater price slips and therefore higher fees.

Change in Asset Prices -- If the price of the assets change, then liquidity providers will receive more of one and less of the other. This may change yield if yield is being priced in a third asset, ie, USD.

How it works

Depositing Assets

Depositing assets on XChains is permissionless and non-custodial.

Liquidity providers can add liquidity to their private pools. Anybody can propose a new asset by depositing it.

The ability to use and withdraw assets is completely non-custodial.

Process

Liquidity can be added to existing pools to increase depth and attract swappers/bridgers. The deeper the liquidity, the lower the fee. However, deep pools generally have higher swap volume which generates more fee revenue.

Withdrawing Assets

Liquidity providers can withdraw their deposited assets at any time. The protocol processes their request and the liquidity provider receives their ownership % of the pool along with the assets they've earned.

Benefits

Liquidity providers earn a yield on the assets they deposit. This yield is made up of fees and rewards. Fees are paid by swappers/bridgers.