How To Add Liquidity
Adding liquidity allows the contributor to earn 0.17% swapping fees from the pairs they've provided. You can supply liquidity and start earning fees via the link here, When you add your token to a liquidity pool (LP), you will receive KNIGHT-LP tokens (KNIGHT's version of liquidity provider tokens).
As an example, if you deposited $KNIGHT and $BNB into a liquidity pool, you would receive KNIGHT-BNB LP tokens.
The number of Knight LP tokens you receive represents your portion of the KNIGHT-BNB liquidity pool. You can also redeem your funds at any time by removing your liquidity.
As an incentive for providing liquidity so that KnightSwap users have the ability to trade with your tokens, we provide farms where you can take your LP tokens to earn even more rewards ($KNIGHT).
You need to provide tokens in a 1:1 value ratio to the liquidity pool. This means that if you are adding to, say, a KNIGHT-BNB pool, and wish to provide 2 BNB worth of liquidity, you would need to convert approx 1 BNB to an equal value of $KNIGHT tokens first via our Swap.
If the pool you wish to provide liquidity for does not exist, you can simply create it. As the first liquidity provider, you have the honor of setting the initial exchange ratio (price), if one of the tokens in the pair does not exist yet on KNIGHT. The price will correct itself (as long as there is demand) through arbitrage and by more liquidity providers adding to the pool.
By adding liquidity, you are putting equal USD value of 2 tokens to make KNIGHT LP tokens. Requirements
- MetaMask wallet
- BNB for gas
3. You will need to have your equal pair ready
4. If you are satisfied with your allocation press "Supply"
5. Press "Confirm Supply" once you have double checked everything again.
6. Your final product of the Knight LP token will appear at the bottom. You will also be able to see the individual amounts of the underlying pair that you have created. Keep in mind that these totals will change based on the market demand.
Impermanent Loss, AKA (IL) is one of the risks you take on for being a liquidity provider and is a result of how AMMs function. There are many references you can look up on Dr. Google for this, but here is a summary.
Large swings in the relative price difference of the two tokens in the pool could result in a loss compared to holding the tokens themselves if you withdraw at that precise moment (hence the term impermanent). The loss is only "permanent" if you withdraw your liquidity completely, however that does not mean the IL will necessarily go away over time. Generally speaking, the trading fees received for being a liquidity provider and the yield from the farm can offset IL risk, but nothing is guaranteed.