Create LP Tokens: How to do it 3 Simple Steps

Josh Miller
LP tokens are issued to liquidity providers. They represent a certain amount of liquidity in a pool. That way, the liquidity provider can redeem their LP tokens for their share of the liquidity pool at any point.
uniswap lp liquidity

LP tokens are issued to liquidity providers. They represent a certain amount of liquidity in a pool. That way, the liquidity provider can redeem their LP tokens for their share of the liquidity pool at any point. (Get their money back.)

LP tokens have the luxury of earning trading fees. They’re also used for farming. Incentives are put up by a DEX so people provide liquidity. These people earn extra tokens as well as trading fees from providing liquidity.

Creating LP tokens is simple. Any DEX worth their sauce will have a simple route to create LP.

Requirements

  • Two pools of ERC20 tokens of equal value (for example, $100 of AVAX and $100 of USDT.)
  • Gas fee (this usually isn’t too high.)
  • Metamask (to connect to the dApp.)

Creating LP

Most DEXs are forks of Uniswap. This applies to most DEXs. Uniswap, SushiSwap, PancakeSwap, you name it. They all use LP, and they all operate in a similar fashion. This group of DEXs are all AMMs. Automated market makers. Anyway…

Simply find the Pool button on the dApp. Once you’re there, click it.

image 34

A form will open up, with two inputs. Select the tokens you wish to Add to the liquidity pool. Most liquidity pools require two tokens. In some cases, they might seek more, but these are mostly in weird pairs. No need to worry yourself over this.

image 35

Then, input the amount you’d like to put up. Note, that the liquidity value must be equal on both sides. Buy more if you’re short. On input, the other side of the liquidity pool should automatically calculate itself. Use the Max buttons to make this easier.

See also  Axial Exchange Review (Avalanche Stablecoin Swap)

Finally, Add the tokens to the liquidity pool. In return, you’ll receive LP tokens. These tokens can be used to deposit into Farming pools.

FAQs

What are LP tokens?

A liquidity provider token (LP) is a token that’s used to incentivize market participants who provide liquidity to a decentralized exchange. Using an LP allows market participants to stake their tokens in order to receive rewards. The staking of these tokens and the act of providing liquidity are made possible through the use of smart contracts, which allow for decentralized and trustless execution of code across a blockchain network.

The value of an LP increases as the number of users on the exchange increases because more users mean more liquidity being provided by the LP holders. This offers a unique way for providers of liquidity to get paid for their service in a decentralized system, even if they’re not directly connected to the network. A blockchain-based platform such as Stellar can be used because it has all the functionality needed for such a system, including smart contracts and atomic swap functionality (which lets any two parties exchange different assets in a single transaction).

Total
0
Shares
Previous Post
image 22

How to add a token to Metamask

Next Post
iotex dex zoomswap

IoTeX DEXs: The 5 Best Decentralized Exchanges on IoTeX

Related Posts