Add liquidity to an L2 AMM pool

Liquidity providers (LPs) currently earn 0.2% fee from all trades in the pools they provide liquidity to, proportional to their share of that pool. To become a Liquidity Provider, you simply deposit an equal value of both assets in the pool.

To become a Liquidity Provider on Loopring, head over to the ‘Earn’ tab on top, and choose which pool you want to provide liquidity to. Click ‘Subscribe’.

To add liquidity to a pool, you need an equal value of both assets, which gets deposited to the pool at the prevailing exchange rate of that pool. That is, if you want to become an LP in the LRC-ETH pool, you would need $100 worth of LRC and $100 worth of ETH.

Choose the amount you want to add from one asset or the other. The UI will automatically prompt you to deposit the other asset quantity given the exchange rate at that time to ensure an equal value. Then click ‘Add Liquidity’.

Your deposit will execute immediately.

While depositing to a pool is gas-free, there is a small fee associated with the transaction. This is because the operation, even though done on L2, has a smaller corresponding L1 gas cost. So the cost varies with gas prices on L1. At time of writing, it is 0.008 ETH.

Your position in the pool will be represented by LP tokens which you hold on L2. You can see your LP tokens for a given pool and the percentage that it represents on the ‘My Investments’ page. You can also see your LP tokens in your ‘L2 Assets’, since it is effectively an asset like any other. The name of an LP token for the LRC-ETH pool for example would be LP-LRC-ETH.

To see your AMM Liquidity positions, click ‘L2 Assets’, and then ‘My Investments’. There you will see your total position value and fees rewards from providing AMM liquidity.

IMPORTANT Being a Liquidity Provider is not risk free. You face the potential risk of ‘impermanent loss’ just like with most other AMMs.