Liquidity Providers
Liquidity providers are essential for the overall health of the protocol. By providing capital in the form of assets, liquidity providers contribute towards a fundamental function of the exchange - trading. To incentivise deep liquidity across the platform, liquidity providers are programmatically compensated with rewards in exchange for their services.
On Regenerative, Liquidity Providers will earn rewards in the form of protocol ownership.
Upon depositing in a liquidity pool, users receive Regenerative Pool Tokens (RPTs) that represent their share of the pool. Over time, the pool collects swap fees from traders, and these fees are reinvested into the pool. The Liquidity Providers’ share of the pool stays the same (RPTs), but the value of the pool increases due to the collection of fees.
Swap fees are a key source of yield for liquidity providers. This yield is automatically reinvested into the pool and users never need to harvest these rewards, instead, the value of the pool will increase.
Alice, Bob, Chuck, and Diana all invest in the same liquidity pool. The total value of liquidity provided is worth $100. Over time, the pool collects fees from traders swapping in and out of assets within the pool. Due to the culmination of swap fees reinvested back into the pool, the value of the pool has now grown to $200. Each user’s share of the pool has stayed the same, but their initial investment value has increased.
Alice
50%
$50
$100
Bob
25%
$25
$50
Chuck
12.5%
$12.50
$25
Diana
12.5%
$12.50
$25
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