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Liquidity Pools

You can only swap tokens on IguanaDEX if there is enough liquidity for those tokens. If nobody has added much liquidity for the token or tokens you want to swap, it will be difficult, expensive, or impossible to do so.

Providing liquidity will get you LP Tokens, which will earn you rewards in the form of trading fees for making sure there's always liquidity for the exchange to use.

Liquidity Provision fees vs Impermanent loss

Liquidity providers net P&L on the LP operation mainly depends on 2 things:

• The fees received by liquidity providers - which are paid by the traders

• The risk of impermanent loss should the liquidity provider remove liquidity at a price that is significantly different from the price level that prevailed when they added liquidity