Liquidity Pool

What is a Liquidity Pool?

A liquidity pool is a smart contract that holds tokens and facilitates decentralized trading, lending, or yield generation without the need for traditional order books. Liquidity providers (LPs) deposit their assets into the pool and, in return, earn fees or rewards.

The Role of Liquidity Pools in Alchemis

The Alchemis ecosystem requires sufficient amounts of liquidity to seamlessly perform its operations. Therefore, the implementation of a native liquidity pools aims to simplify these operations by ensuring that minimal thresholds of liquidity are met for the major swap pairs.

User's Contribution to the Liquidity Pools

On the Alchemis interface, users may alternatively choose to deposit their ALS into native Alchemis liquidity pools. That way, they are entitled to earn rewards for providing liquidity to the ecosystem. It is a solution to earn yield, parallel to the traditional Compass.

Benefits

By providing liquidity directly on the Alchemis platform rather than on other protocols, LPs are entitled to receive additional rewards than the basic APY. Alchemis constantly distributes a small percentage of its ALS tokens to LPs in order to incentivize users to contribute to the ecosystem. This system will ensure sufficient levels of liquidity for major pairs and therefore guarantee the ability of Alchemis to conduct its operations and keep fees low for Compass users. It is a way for Alchemis to give out subsidies to those who make the ecosystem cheaper and more efficient.