Becoming a liquidity provider (LP) involves placing your tokens into a decentralized trading pool, where they will be used to execute swaps between different assets. For example, if you were to become an LP for an ETH/USDT pool, you would provide an equal weighting of each token (based on their dollar value) into the liquidity pool.
There are three primary reasons why you might wish to become an LP:
- To support an early stage project you feel passionate about. Bootstrapping its liquidity in the early stages helps the project grow, and makes it easier for xSigma users to trade stablecoins.
- To profit from all swaps executed. LPs generally earn a fee on all trades that occur within the pool on a pro rata basis.
- To earn additional yield from staking the LP tokens that are assigned to liquidity providers to denote their pool share. These can be locked into other participating protocols to generate additional yield.
With the impending launch of xSigma, we expect LPs to provide liquidity for all these reasons: the excitement of getting in on the ground floor of a highly anticipated new DEX; to earn passive income from pool fees; and the ability to earn SIG, the native governance token.
How LP’ing Works With xSigma
As a stablecoin DEX, xSigma will require LPs to pool stablecoins. For stablecoin swaps to be executed efficiently with minimal slippage, it’s imperative that there are as many pooled tokens as possible.
Participating in the launch of xSigma as a liquidity provider will provide a better trading experience for all users, while allowing you to earn rewards from day one. It’s a win-win situation.
You can provide liquidity for the trio of stablecoins listed on xSigma, with no maximum or minimum amount.
You can provide liquidity with a single coin (i.e., just USDT), or with two or three types of stablecoins.
Whether you’re a stablecoin whale or merely a minnow, you’re equally welcome to participate, and will be rewarded proportionally to your pooled tokens.
What You Need to Become an xSigma LP
To become an xSigma LP, it’s helpful if you have all the tools and assets you’ll require lined up in readiness. You’ll need an Ethereum web wallet such as MetaMask containing some ETH, to pay for gas. You’ll also need the stablecoins you wish to pool: these can be purchased on an existing DEX such as Uniswap or on a centralized exchange and then sent to your MetaMask address.
In addition to stablecoin pools, there will be a SIG/ETH pool created on Uniswap. Here you can acquire SIG tokens, and also trade in and out of the SIG you earn for LP’ing.
- After acquiring stablecoins and placing them in a web3-compatible wallet, visit the xSigma Liquidity page.
- Select the amount of stablecoins you wish to deposit and execute the transaction. You will be prompted to sign it using your web wallet.
- When the transaction has been completed, you will be issued with SIG LP tokens that denote your pool share.You can exchange your SIG LP tokens for your pooled stablecoins at any time.
- Visit the Rewards page to stake your SIG LP tokens. Here you can also stake Uniswap LP tokens for pooling SIG/ETH in the Uniswap pool. Select the DAI/USDC/USDT_LP pool to deposit your SIG LP.
- You will now be able to view and claim your accrued SIG tokens from the Rewards page.
- Select Harvest to claim your earned SIG without unstaking your pooled tokens.
And that’s it: you’re now an xSigma LP! The longer you LP, the more rewards you will earn.
Guides and FAQs with detailed instructions to simplify the process of becoming an xSigma LP are available at our Resource Center.