FAQ

1. What is an AMM, and how does it work?

An AMM (Automated Market Maker) is a decentralized trading platform that allows token swaps directly through smart contracts without intermediaries. On units.swop.fi, liquidity is provided by users who deposit pairs of tokens into pools. These tokens are then used for trading based on a formula where x * y = k, where x and y represent the token amounts in the pool, and k is a constant that maintains balance.

2. How do I add liquidity to a pool?

To add liquidity, select the token pair you’d like to provide. You’ll need to deposit equal values of both tokens according to the current exchange rate. Once deposited, you will receive liquidity provider (LP) tokens, which represent your share of the pool and entitle you to earn a portion of the trading fees generated in that pool.

3. How do I earn rewards by adding liquidity?

Every time a trade is made in a pool, a small fee (0.3%) is charged and distributed among all liquidity providers in proportion to their share of the pool. These fees accumulate in the pool, and you can withdraw them along with your initial assets when you decide to remove your liquidity.

4. What is Impermanent Loss, and how does it affect my earnings?

Impermanent Loss is a temporary loss of value that occurs due to changes in the prices of tokens in the pool. If the price of one of the tokens changes relative to the other, it may result in you receiving fewer assets upon withdrawing liquidity than if you had simply held the tokens. This loss becomes permanent if you withdraw your liquidity when prices differ from when you initially deposited.

5. Can I withdraw my liquidity at any time?

Yes, you can withdraw your liquidity at any time. When you do, you’ll receive back the original tokens (subject to price and quantity changes) along with the accumulated fees.

6. What are “liquidity provider tokens,” and how can I use them?

Liquidity provider (LP) tokens represent your share of a liquidity pool and act as proof of your contribution. You can hold these tokens, sell them, or use them on other DeFi platforms that support LP tokens from units.swop.fi.

7. Are there risks associated with providing liquidity?

Yes, there are risks. The primary risks include Impermanent Loss and potential vulnerabilities in smart contracts. Additionally, the price of assets in the pool may fluctuate, affecting your final returns.

8. How is the price determined when swapping tokens?

Prices on units.swop.fi are determined by the formula x * y = k, where x and y are the amounts of each token in the pool. As you buy more of one token, its price increases. This model, called a “constant product formula,” helps keep prices stable based on the token ratios in the pool.

9. Can I trade any tokens?

You can trade any tokens with liquidity on the platform. If a pool for your desired pair doesn’t exist, you can create one by providing the initial liquidity.

10. What fees are charged for swapping?

Every swap on units.swop.fi incurs a fee that is fixed in the smart contract and distributed to liquidity providers. Additional network fees, such as gas on the Units network, may also apply.

11. How can I safely use the platform?

To minimize risks, always ensure you’re interacting with official smart contracts and avoid counterfeit tokens or imitation platforms. Use secure wallets, such as MetaMask, and carefully review each transaction before confirming it.

12. How is units.swop.fi different from other AMM protocols?

units.swop.fi operates on the Units network, where the primary token is UNIT0. It provides a familiar AMM experience with decentralized swaps and liquidity pools but specifically supports the Units ecosystem and its native tokens.