Adding Liquidity to a Tezos DEX [Quipuswap]

How to add liquidity to a Tezos DEX (Quipuswap), step-by-step

Published in

Tezos DeFi

6 min readFeb 13, 2024

If you’re new to Tezos DeFi, Quipuswap is one of the more reputable Tezos DEXs. Plenty DEX, SpicySwap and a few others are held in such esteem as well. Quipuswap is the longest running of actively maintained Tezos DEXs. Other articles will be written for those other exchanges, respectively.

Background/FAQ
How to add Liquidity to Quipuswap
How to Remove/Manage Liquidity on Quipuswap

[Disclaimer: This article is for educational purposes only and should not be taken as financial advice. The cryptocurrency market is volatile and the information presented here may change. I am not responsible for any financial losses resulting from the use of this guide. Perform your own research and consider your financial situation before engaging in transactions. Links to third-party websites are for convenience and are not endorsements.]

Background/FAQ

What is a Liquidity Pool?

Liquidity Pools are the lifeblood of DEXs. Liquidity Pools are smart contracts owned by the pool’s Liquidity Providers (see below) who supply the pool with liquidity. They are usually pairings of 2 currencies, supplied in equal value to each other.

When traders trade between two currencies in a simple DEX, they are trading between the two currencies in a Liquidity Pool.

What is a Liquidity Provider?

Liquidity Providers supply Liquidity Pools with the currencies needed for trading to occur. Each pool is designed for specific currencies, so Liquidity Providers must provide their chosen pool(s) with equal amounts of each pool’s respective set of currencies.

Liquidity Providers may also have governance rights to the pool, depending on how the pool is designed, that they may choose to exercise or not.

Liquidity Providers can remove their liquidity from a pool whenever they like.

Do Liquidity Providers Earn Money?

Adding liquidity to a DEX lets liquidity providers earn from the transaction fees accrued when other people make trades using that liquidity pool.

Some people describe providing liquidity to a DEX as ‘renting out’ liquidity so that people can make trades. Every trade incurs a percentage fee for the trader (e.g. 0.3% fee). The fee goes to those that own the pool—the liquidity providers.

If a pool is very active with a lot of trading and volume, then that means more earnings for the liquidity provider.

In Tezos, XTZ/USD is by far the most active pairing with the most trading. This has always been the case true on centralized exchanges and on Tezos DEXs. The second most popular pairing is XTZ/USD

How to add to a Liquidity Pool on Quipuswap

Adding to a Liquidity Pool on Quipuswap is easy and can be done in 5 simple steps! We’ll use the pairing Tez (XTZ) + USD Tez (USDtz) pairing as an example. On Quipuswap, you’ll see USDtz-Tez.

The quickest way to get some USDtz is to buy it through 3route.io (3route is an aggregator of DEXs, including Quipuswap. This link will get you to the exact link to buy USDtz 3route.io/swap/xtz/usdtz).

To get a larger amount of USDtz visit: USDtz.com/get. USD Tez (USDtz) is a reserve-backed USD stablecoin exclusive to Tezos blockchain. USDtz is the first/longest-running and most used USD reserve-backed stablecoin on Tezos.

Step 1 — Go to the Liquidity Page for the Pair

Each pairing has its own page to add/manage liquidity. (For convenience, here is the liquidity page we’ll be using.) To manually get there, go to Quipuswap.com, go to Liquidity, and choose the USDtz/Tez pairing. (Note, 2 contracts for this pairing exist—an old version and a new version—and the first version you see may be the old version. Make sure you’re using the latest version of the contract by using this link).

Step 2—Connect Wallet

Connect your Tezos wallet to Quipuswap. Click on the “Connect Wallet” Button.

Step 3—Enter Liquidity Amount

Enter in the Input the amount of liquidity that you want to add. Even though you’re only typing in a USDtz amount, you’ll notice that the tez (XTZ) side will auto-fill with an equivalent amount of tez. Make sure you have enough of both.

The market price of Tez (XTZ) at the time of this screenshot is about $1, which is why the autofill is showing 1 Tez after entering $1 USDtz. The Autofill will reflect the market price of tez at the time that you use it.

(If you’re planning to follow these steps for the first time, I recommend trying it with a negligible amount of funds ($1 or less). That way you can get comfortable with these steps before committing a more significant amount of capital.)

(Optional) Step 3.5—Choose a Baker

By default, Quipuswap chooses Everstake baker to stake the tez in the pool. If you’d like to choose a different baker, choose one from the drop down list or search for one from the search bar at the top of that list.

Step 4—Review and Add

After reviewing the information, click the Add button.

Step 5—Sign the Transaction

In your wallet, confirm and finalize the transaction by signing it. Depending on which wallet you use, a prompt may pop-up in a new window asking you to confirm, or you may need to go to the screen for that wallet to see it the request to confirm/sign.

That’s it! You’ve added XTZ/USDtz liquidity to Quipuswap, and are now a Liquidity Provider!

Note about Liquidity Tokens (What’s this QPT thing?)

On Quipuswap, Liquidity Tokens [representing your share of ownership of the liquidity pool] are represented as symbol QPT and will be visible as the ‘Input’ field of the ‘Remove’ tab

You will have received a ‘liquidity token’ which is kind of like a receipt that represents your unique position in this specific pool, including the proportion of the pool that you now own. Hold on to this token until it’s time to redeem. [Advanced: You can even potentially use this token in liquidity token ‘farms’ which is a more advanced topic that will be covered in another article]

How to Remove/Manage Liquidity on Quipuswap

Removing or Managing your liquidity on Quipuswap is as easy as adding it. Even if you plan on adding more liquidity to this pool, it’s useful to try removing liquidity as well, just so you know how it’s done and the fact that it can be removed very easily.

Step 1 — Go to the ‘Remove’ tab

Click the Remove tab in the liquidity page for the respective pair.

Step 2—Enter the amount that you’d like to remove

To remove all the liquidity you have in the pool, click on the MAX button underneath the first Input line’s text field. This will queue up the app to remove all the liquidity that you currently have in this liquidity pool.