XEI Docs
  • 👋Welcome to XEI
  • Feature Description
    • 💫Swap Trading
    • ✨Leverage Trading
    • 💰Liquidity Pools
    • 🎭Lending Pools
    • 💵Liquidation
    • 💹Oracle
  • PRODUCT GUIDES
    • 📒Tutorial
      • Getting Started on XEI
      • How to Start a Market Swap
      • How to Add Trading Tokens
      • How to Start Futures Trading
      • How to Add Liquidity
    • ❓FAQ
      • What should I do if I can't find the cryptocurrency I want to trade?
      • What are market orders and limit orders?
      • What fees are associated with Swap transactions?
      • What are fee tiers, and how do you choose the right fee tier?
      • What happens if the current price exceeds the price range set for my liquidity position?
      • Are fee rewards automatically compounded?
      • What factors affect LP APR?
      • What is Lending Pools?
      • How is the reward period calculated after participating in Lending Pool?
      • Which cryptocurrencies are supported by Lending Pool?
      • How long does it take for redemption to be credited to the account?
  • OTHER
    • 💌Contact Us
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On this page
  • What is a liquidity pool?
  • XEI V3
  • Active liquidity and price ranges
  1. Feature Description

Liquidity Pools

What is a liquidity pool?

A liquidity pool is a collection of tokens secured within a smart contract, facilitating asset trading on decentralized exchanges (DEX) such as XEI.

In conventional finance, liquidity is managed through a central limit order book, where buyers and sellers place orders organized by price and demand.

The XEI Protocol employs a unique strategy, utilizing an Automated Market Maker (AMM) instead of the traditional order book system. This involves a liquidity pool of two assets, with the AMM determining their prices.

Liquidity providers (LPs) supply these tokens and, in return, receive LP tokens as a reward for their contribution.

XEI V3

When you contribute your tokens to a Liquidity Pool, you will receive Liquidity Provider NFT tokens and gain a share of the fees.

In V3, liquidity providers gain greater control over the price range at which they deploy their liquidity. Adding your token to a Liquidity Pool in V3 will result in the creation of a unique non-fungible liquidity position with specific settings.

As such, liquidity positions in V3 are represented by NFTs. These NFTs are transferable and signify ownership of the underlying assets and the trading fees they accumulate.

Unlike before, trading fees in V3 will not be automatically compounded within the position. You will need to manually claim them on each position's detail page.

You can withdraw your funds at any time by removing your liquidity.

Active liquidity and price ranges

In V3, liquidity providers have the option to set their positions to supply liquidity only within a specified price range. If the trading price shifts outside of this range, the position will hold only one type of token from the pair and will be rendered inactive.

Inactive liquidity positions will not engage in trading or accumulate any trading fees.

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Last updated 12 months ago

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