💰Liquidity Provision
This guide will help you understand how to provide liquidity on Dozer Finance and earn rewards.
Understanding Liquidity Provision
What is Liquidity Provision?
Liquidity provision is the process of contributing tokens to trading pools, which enables trading for other users on the platform. As a liquidity provider, you'll earn rewards from trading fees while playing a crucial role in supporting market efficiency.
Benefits
By providing liquidity, you'll earn 0.3% in trading fees from all trades in your pool. This not only provides you with a steady income stream but also helps support the Dozer ecosystem, enables more efficient markets, and allows you to actively participate in the platform's growth.
Getting Started
Prerequisites
Before getting started, ensure you have a Hathor Wallet connected to the testnet and sufficient amounts of both tokens you wish to provide as liquidity. You should also have a good understanding of impermanent loss and basic knowledge of how liquidity pools work.
Finding Pools
Navigate to Pools section
Browse available pools
Review pool statistics:
Total liquidity
Volume
Fee earnings
Your potential share
Adding Liquidity
Step-by-Step Process
Select your pool
Choose "Add Liquidity"
Enter amount for first token
System calculates second token amount
Review your contribution
Approve transaction in wallet
Important Considerations
When adding liquidity, you'll need to maintain the correct token ratio for the pool. Make sure to account for slippage and understand the minimum amounts required. Review any associated fees and carefully check your potential pool share before confirming your contribution.
Managing Your Position
Monitoring
View your active pools
Track earned fees
Monitor pool share
Check current values
Liquidity Management
The liquidity position is registered inside the Liquidity Pool nano contract, so you can view your position in the Dozer in two ways:
Inside the pool page, in "My Positions" section
In Pools Table, you can acess "My positions" tab
Removing Liquidity
Withdrawal Process
Go to Pools section
Select active pool
Choose "Remove Liquidity"
Enter LP token amount
Review token returns
Confirm transaction
Receive tokens back
Considerations
Check withdrawal timing
Account for price changes
Verify returned amounts
Monitor transaction status
Understanding Risks
Impermanent Loss
Price change effects
How to calculate
Risk management
Mitigation strategies
Market Risks
Providing liquidity comes with exposure to market risks including price volatility and pool balance changes. You should monitor volume fluctuations and overall market conditions that could affect your position.
Best Practices
Before Adding Liquidity
Research the pool
Understand the risks
Check pool metrics
Have sufficient tokens
Plan your strategy
Active Management
Monitor your position
Track earned fees
Assess market conditions
Plan exit strategies
Rewards and Earnings
Fee Structure
Liquidity providers earn a 0.3% fee from all trades in their pool, distributed proportionally based on their pool share. These fees accumulate automatically and can be tracked in real-time through the platform interface.
Viewing Earnings
Check pool interface
Monitor fee accumulation
Track total returns
Calculate APR
Advanced Topics
Pool Analysis
Successful liquidity provision requires a deep understanding of pool metrics including depth, volume patterns, and potential fee earnings. Consider the market impact of your positions and use this analysis to inform your strategy.
Strategy Development
Position sizing
Entry/exit timing
Pool selection
Risk management
Troubleshooting
Common Issues
Transaction failures
Price impact issues
Slippage problems
Balance discrepancies
Solutions
Check wallet connection
Verify token approvals
Review pool status
Contact support if needed
Next Steps
Review Trading Guide
Understand MEV Protection
Check Troubleshooting if needed
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