Liquidity Pools in Tezos DeFi

Passive income rewards from supplying Dexter and Quipuswap

4 min readSep 9, 2020

[UPDATE: Dexter has launched since this article was published.]

The Tezos ecosystem will soon have Uniswap-like DEXs, also known as Automated Market Makers (AMMs). Namely, Dexter by camlCase will launch soon, followed by Quipuswap from Madfish.

When Dexter launches, many will rush to Add Liquidity to Dexter liquidity pools. That is, supplying a 50/50 balance amount of a unique pairing tradeable on the exchange side of the platform.

How does it work?

For example, a person could supply the XTZ/USDTZ pairing with $10,000 worth of XTZ and $10,000 of USDTZ.

Liquidity pools adhere to 50/50 supply ratio:The user wants to supply $10,000 of liquidity to each side of the pool for a total of $20,000 of value.That would mean the user would supply:(Assume market price of XTZ = $2)ꜩ5,000 XTZ+$10,000 USDTZ

After supplying the liquidity, the user receives “Pool Tokens” from Dexter which signifies their contribution position. They can withdraw at any time, giving up their pool tokens.

Screenshot from Dexter preview. Beta version: https://dexter.camlcase.io

What’s the incentive to add liquidity?

Why would they do this? For an individual, supplying liquidity can earn them rewards in the form of a share of the transaction fees incurred from users trading that particular pair.

Uniswap charges 30 basis points per transaction (0.30%). This fee goes to the liquidity suppliers in proportion to the amount they supplied relative to the total amount supplied.

Likewise, on Dexter, the amount that each individual gets will be in relation to their proportion of the liquidity supplied. If one person supplies all of the liquidity, then that one person receives a full 30 basis points (0.30%) per transaction.

Assuming the trading activity on Dexter is adequate, the earliest liquidity suppliers stand to make the most revenue, benefiting from the arbitrage of demand and supply. After those suppliers start to gain revenue, they’ll face more competition from FOMO participants.

Which pools will be available on Dexter?

You can supply the available liquidity pools. Tyler Clark of camlCase said on a recent TQuorum talk that the first pools (markets) that will be available will be:

XTZ/USDtz
XTZ/tzBTC
USDtz/tzBTC

What do I need to add liquidity to Dexter?

For Mobile: If you plan to do it all on mobile, you’ll need a Dexter-ready mobile wallet. Right now the only Dexter-ready mobile wallet is

Magma Wallet—Mobile Wallet (iOS and Android)

[NOTE: Dexter is not yet implemented on Magma, but camlCase says in October it will be. When it is, I’ll remove this note]

For Web Browser: For web-browser participation, you’ll need the Beacon extension created by AirGap and a Browser wallet

Beacon Wallet — Browser Extension (fChrome/Brave — The Beacon extension lets you interact with Tezos exchanges like Dexter and Quipuswap from your web browser. Beacon is an open-source app, produced and supported by AirGap.

weBeacon extension in the Chrome store (Chrome extensions also work on Brave)

Browser Wallets — right now, Thanos is the only browser wallet.

Thanos Chrome/Brave Browser Wallet

Thanos Wallet extension in the Chrome store (Chrome extensions also work on Brave)

How do I get those tokens?

You’ll need tokens to supply the liquidity pools. Each token has its own method of acquisition from a primary market. Here is a list of active Tezos tokens.

Visit the individual websites for these tokens:

You can purchase USDtz from a Mintery, or potentially enroll as a minter.

tzBTC has Gatekeepers from whom you can purchase its token.