Liquidity Provision

A liquidity pool is a smart contract that locks tokens to ensure liquidity is available on a decentralized exchange. zkVault allows participants to supply traders with Decentralized On-Demand Liquidity (DODL) and collect passive income via trading fees in the same manner as centralized exchanges like Binance. zkVault liquidity pools require a 50/50 token split meaning the user must provide equal value amounts of both tokens. After providing liquidity, the system mints LP Tokens for the user, which act as keys to unlock the provided liquidity. Fees are accrued in real-time relative to the users' pool share as trades occur. Participants can collect their accrued trading fees and reclaim their provided liquidity at any time. When a user withdraws from the liquidity pools, they burn their LP tokens. The system then returns the original tokens provided as liquidity plus liquidity provider fees accrued or minus impermanent loss.

Liquidity Providers are key to the success of any AMM and therefore, must be adequately incentivized. By incorporating L1 incentives, zkVault LPs offer a multifaceted revenue stream in the form of:

  • Liquidity Fees

  • L1 Delegation Rewards

  • L1 F-Asset Rewards

  • ZkVault Farm Rewards(Optional)

All accrued rewards are collected when users burn their LP tokens, +/- impermanent loss.

Last updated