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Providing Liquidity Overview
On a Camelot DEX, a liquidity pool is a crowdsourced pool of tokens locked in smart contracts and used to facilitate trades between the assets. Automated market maker (AMM) allow digital assets to be traded in an automatic and permissionless manner through liquidity pools, replacing traditional markets of buyers and sellers.
Adding liquidity to the pool will only earn you trading fees. If you want to earn farming emissions as well, you need to create an spNFT position, which can be done without adding LP first
For example, ETH/USDC LP tokens will be generated if liquidity is added to ETH/USDC. Your share of the ETH/USDC liquidity pool is represented by the LP tokens you receive. While you are providing liquidity to ETH/USDC pair, your LP token will automatically earn a portion of every transaction fee on that pair. Moreover, you can wrap that LP token into staked position (spNFT) to access more utilities and, most notably, to earn additional rewards on top of the fee rewards
- By wrapping the LP token into spNFT you can create a staked position that will generate additional yields from incentive pair and nitro pool
- spNFT = wrapped V2 or V3 LP