Tutorial: Providing Liquidity in Osmosis Pools
In the previous article, we introduced Osmosis and its features. In this article, we will show how to provide liquidity on Osmosis pools.
As an AMM DEX, Osmosis allows developers to build customized AMMs with sovereign liquidity pools. Instead of trading directly with other people as with a traditional order book (we usually find this scheme with CEX), users trade indirectly through the AMM.
To incentivize people to provide liquidity, Osmosis offers a portion of the swap fees collected as rewards. When providing liquidity, users receive LP shares to calculate their fractional ownership of a liquidity pool. To incentivize long-term liquidity commitment, shares must be locked up for an extended period. Longer-term commitments are awarded by additional voting power/additional liquidity mining revenue.
Pre-requisites
- Create Keplr Wallet
- Deposit ATOM to Osmosis Chain
Step 1: Providing Liquidity
- Connect wallet on Osmosis
- Select on the left tab — “Pools”
Note: Superfluid pools is an innovation from Osmosis where beside providing liquidity, users can stake their OSMO shares and help securing the Osmosis network while getting additional rewards.
3. Choose the pool. For this guide, we will use the ATOM/OSMO pool.
Note: To provide liquidity, you’ll need to provide both tokens. Please make sure you have prepared the tokens that match your chosen pool. Or at least have a balance for one of these tokens.
4. Select “Add Liquidity”
5. Choose to provide all assets or single assets. If both assets are available, you can input the quantity of one of the assets, and the other asset will auto-fill proportionally.
6. If you have only one amount of the assets available, you can choose “Single asset” and the other asset will automatically be swapped for.
7. Select “Add Liquidity”
8. A Keplr pop-up page will appear, check again the information. Select fee — Click “Approve”.
9. Done! You have now successfully provided liquidity to an Osmosis pool.
Note: You can remove liquidity anytime you want, there will be no unbonding period for this action.
Step 2: Bonding LP Shares
- Now that you have LP shares, you can generate more rewards by bonding the LP shares.
2. Click details to find more information
Note: Kindly notice that there are different unbonding period. The longer the unbonding time equals bigger APR.
3. For this guide, choose the 14 days unbonding option, so you can also do Superfluid staking.
4. Click “Bond Shares”
5. Choose “14 days”.
6. Enter the amount to bond — Click “Next”
7. With Superfuid Staking, you can stake your OSMO part to the Osmosis Validator and gain more rewards.
8. Choose the validator — Click “Bond & Stake”
9. Confirm the transaction — Click “Approve”
10. That’s all! Sit tight and wait for your rewards on every Epoch.
11. To Unbond, just click the Unbond button and confirm the transaction.
Note: The rewards will be paid every day. In Osmosis it is referred to as an Epoch. You can check the countdown on the Pools page. The rewards will be sent directly to your Keplr wallet.
This article is made only as a guide and cannot be seen as financial advice. We assumed that when you are following this guide, you have already done your own research on the token and all the risks that might happen.
