❓FAQ
What are fee tiers and how to pick the correct one?
When you are providing liquidity, you can choose between several different trading fees (0.01%, 0.05%, 0.25%, 0.1%, 5% and 10%) for the same token pair.
For example, for FTM-USDC, there might be a 0.25% pair, which means a 0.25% trading fee is in place for every trade. However, some liquidity providers might choose to provide liquidity to a FTM-USDC trading pair with a 0.05% fee rate, offers a better quote and attract more trading volume.
There is no “correct” answer for which trading fee configuration to choose. It depends on the tokens within the trading pair. Usually, volatile tokens should have a higher trading fee to better compensate for the impermanent loss brought by the volatility. On the other hand, tokens like stable coins have smaller price movements and lower impermanent losses, therefore their trading fee should be lower.
When selecting a token pair, the “Add Liquidity” interface will automatically choose the most popular fee tier for you.
Why two of my deposit tokens are not equal in USD value?
Underlying assets in a liquidity position will not always have an equal value in USD. It will depend on the price range settings of a position and the current price of the pair.
In fact, if your position goes out of range, all tokens will be converted to one single asset. Plus, you can provide liquidity to a price range that does not cover the current price and deposit one single asset only.
What happens if my liquidity position goes out of range?
You will not earn any trading fee rewards if the current price goes out of the price range defined in your position.
On top of that, all tokens will be converted to one single asset depending on the direction of the price condition.
For example, if a position of FTM/USDC is configured with a price range of 3 USDC per FTM to 5 USDC per FTM. And all assets in the position will be converted to USDC if the FTM price is higher or equal to 5 USDC per FTM, and vice versa.
Note that if the price moves back in the range, you will start receiving trading fee rewards again. No additional actions are required.
Is it better to always provide liquidity with a smaller range?
Providing liquidity to a smaller price range will help concentrate your liquidity to a spesific price range, boosting your relative shares against the total liquidity within the price range, potentially earning more trading fee rewards.
However, please bear in mind that only active liquidity positions will earn trading fee rewards from trades. This means you will only earn rewards when the current trading price is within the price range defined in the liquidity position.
What will be the trading fee breakdown?
Liquidity Provider
67%
66%
68%
68%
68%
68%
Protocol fees
33%
34%
32%
32%
32%
32%
What affects LP APR?
LP fee reward APR could vary between liquidity positions. It is based on the following factors:
Trading volume - More volume generates more fee rewards
Liquidity pair fee tier - Higher fee tier generates more fee rewards from individual trades
The number of tokens deposited - More token in the position translates to a larger relative share against the total active liquidity, which gets more trading fee rewards from trades
The selected price range - Smaller price range allows a higher concentration for the same amount of token deposited, which translates to a larger relative share against the total active liquidity, and gets more trading fee rewards from trades
The amount of liquidity currently active - If there are more users who deposit and concentrate their liquidity with the same range as you, you will earn less trading fee due to a smaller relative share against the total
Whether the liquidity position is active - Only active liquidity positions will earn trading fee rewards
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