🌊Liquidity Providers

What to know

Once a token has been added in Dyson Swap, many token pair pools are also added. Pools can be thought of as entries in a table, where the rows and columns are various tokens. There is only one pool per token pair (i.e. an upper triangular matrix).

When adding liquidity to a pool, it is necessary to deposit tokens proportional to the existing balance of tokens in the pool. One-sided deposits are not currently available.

All earnings from internal arbitrage transactions are paid in SOL (all internal arbitrage transactions must start with a SOL-X pool and end with a Y-SOL pool). If an internal arbitrage transactions uses the following pools: SOL-X -> X-Y -> Y-SOL, then SOL arbitrage profits are split equally among the 3 pools. Liquidity providers (as of this writing) are assigned 90% of internal arbitrage earnings, arbitrageurs (people who identified the mis-pricing) receive 5%, and the protocol also receives 5%.

There is also a 5 bps (0.05%) fee for swaps, which goes entirely to liquidity providers.

There are a few considerations when deciding which pools to LP. Transaction volume, possible arbitrage routes, and token price volatility are factors to consider. Tokens with moderate volatility may in some cases be beneficial, as it allows for large arbitrage opportunities when price discrepancies occur between pools. Spreading out capital amongst a few different pools will also likely lead to better results.

Note: The automated market making mechanics powering Dyson Swap are experimental, and there is of course risk in using the protocol. Secondly, the code has undergone a professional security review from an independent contractor, though has not yet been officially audited by a large firm.