Pact
Search…
Pools
This section explains the basics of Pools and how to use them on Pact.

What is a liquidity pool?

A liquidity pool (LP) is a mechanism in cryptocurrency markets where tokens are stored in a smart contract for the purpose of providing liquidity to a market.

Benefits of providing liquidity

By providing liquidity to Pact, you will earn 0.3% on all trades on that pair. Fees are rewarded proportional to the percentage share of the whole pool which you own.
Fees are added to the pool, accrued in real-time, and can be claimed by withdrawing your liquidity.
By design, Pact is the only AMM currently offering liquidity providers back 100% of liquidity pool fees they accumulate.

Before you get started

You’re going to need the adequate liquidity in your wallet or an equal amount of tokens for the given pool you want to provide liquidity for.

How to create a liquidity pool

Before you begin
It's important to note that when a new pool is created, the first liquidity provider sets the initial price of the assets in the pool and is essentially creating a new market for that pair of tokens.
With 50:50 constant product AMMs like Pact, each token in the pair needs to be supplied with equal value. If the initial price of the tokens in the pool diverges from the current global market price, it creates an instant arbitrage opportunity – that can result in lost capital for the liquidity provider.
Creating a pool
You can create a new pool on Pact by navigating to the Pools section.
To do that:
  1. 1.
    Select 'Create Pair'
  2. 2.
    Select two tokens that will form a trading pair from the balance in your connected wallet.
3. Specify the amount of token on either side that you wish to add to the pool. These values will determine the pool's starting liquidity. You will be alerted if a pool with these given assets already exists.
4. Check this aligns with the value you wish to add to the initial pool.
5. Press 'Create pool' to confirm the transaction. A notification will appear reminding you to be vigilant when setting your token ratio.
6. You will then be asked to sign the transaction via your wallet 'pop-up'. Enter your password and approve. Note, you will be prompted to sign your wallet three times as an application and transfer of both assets is necessary with the blockchain.
7. A notification that your transaction has been successfully processed will appear.
A liquidity pool will be created upon transaction confirmation. Any user will now be able to make swaps within it and supply their own liquidity.
Reminder: You will always need a nominal amount of ALGO in your wallet to perform any transaction on the Algorand network.

How to add & remove liquidity

Adding liquidity

  1. 1.
    Navigate to the 'Pools' section to see the pools currently available. You can filter by asset in the 'SEARCH POOLS' box.
  2. 2.
    Pick a token pair in your pool of choice and click the
    symbol.
  3. 3.
    Enter the amount, or click MAX to specify the amount of either token you wish to add. The opposite side to the pair will self populate, to match the token value proportionately. Make sure there is adequate balance of each token in your wallet.
5. Click 'Confirm' to confirm the transaction.
6. You will then be asked to sign the transaction via your wallet 'pop-up'. Enter your password and approve.
7. A notification that your transaction has been successfully processed will appear.
Once the transaction has been confirmed, the liquidity you have supplied will start yielding rewards from your given pool. You will receive LP tokens which represent your total share of your chosen pool.

Removing liquidity

  1. 1.
    Navigate to the 'Your Liquidity' button to see the pools you have provided liquidity for.
  2. 2.
    Find the appropriate pool you wish to remove liquidity from and click
    symbol.
  3. 3.
    Enter the specific amount, utilise the percentage slider, or click MAX to determine the amount of liquidity you wish to remove from the pool. Once all the details are entered, review and click the 'Remove liquidity' button.
4. You will then be asked to sign the transaction via your wallet 'pop-up'. Enter your password and approve.
5. A notification that your transaction has been successfully processed will appear.
Your liquidity will be withdrawn from a given pool upon transaction confirmation. The tokens will return to your wallet balance and become freely available.