🧱Add Liquidity & Farming

Kibble's liquidity pools allow anyone to provide liquidity by adding their assets to a pool.

About Kibble Liquidity Pool

Each Kibble liquidity pool serves as a trading venue for a specific token pair within our decentralized ecosystem, starting with the Avalanche blockchain and expanding toward a multichain future. The process begins with the creation of a pool smart contract, where the initial balances of each token in the pool are set to 0. To enable trading, an initial deposit of each token is required to activate the pool.

The individual who provides this initial liquidity becomes the first liquidity provider, and they play a pivotal role in establishing the pool’s initial price. It’s incentivized for this provider to deposit an equal USD value of both tokens (e.g., $KIB and $AVAX on Avalanche) into the pool. This balance is critical because an uneven deposit that is different from the current market rate opens up a quick arbitrage chance that traders on supported chains can use to fix price differences.

As Kibble Pool evolves into a multichain platform, liquidity pools will operate across multiple blockchains, offering users flexibility to provide liquidity on their preferred networks while benefiting from Kibble’s unified interface and analytics.

Liquidity Pool Explanation

When you contribute assets to a liquidity pool, you receive Liquidity Provider (LP) tokens in return, which represent your share of the pooled assets. For example, if you deposit both $KIB and $AVAX, you’ll obtain KIB-AVAX LP tokens. These LP tokens allow you to withdraw your funds at any time.

Every trade between $KIB and $AVAX on Kibble’s decentralized exchange (DEX) incurs a 0.15% fee, with 0.1% redistributed to the LP pool for liquidity providers and 0.05% used to buy back $KIB. Initially, if there were 100 LP tokens representing 100 AVAX and 100 KIB, each token would be valued at 1 AVAX and 1 KIB. However, if one user exchanges 10 AVAX for 10 KIB and another swaps 10 KIB for 10 AVAX; the pool would then hold 100.022 AVAX and 100.022 KIB. Consequently, each LP token would be worth 1.0022 AVAX and 1.0022 KIB upon withdrawal.

Liquidity providers contribute assets to pools because they recognize the value in enabling liquidity. Token creators often add to these pools to facilitate trading of their tokens on the DEX. Liquidity providers earn income by receiving a percentage—typically 0.2% on Kibble—of each transaction within the pool, incentivizing liquidity provision, which is essential for the DEX’s operation.