DEX Lingo That You Need to Know — Part 5 Liquidity Advance

ENEDEX has recently released ENEDEX Alpha. For the uninitiated, some functionalities and lingo to skillfully use the DEX may sounds unfamiliar. Afraid not, let’s learn together some essential lingos that you or your friends that newly into crypto needs to know :

  1. LP Token Staking

LP or Liquidity Pool Token Staking is an act of locking up representative token earned after providing liquidity to a certain pool for a certain amount of time to gain rewards such as NFT or native token or liquidity pool’s token or other type of reward

2. Swapping Fee

Swapping fee is the fee that the user has to pay to do a swap in a decentralize exchange. This fee is deducted automatically from the total token that is being swapped. The fee will go to Liquidity Provider split according to the percentage that the user own in that pool. For ENEDEX the fee is 0.3%

3. Liquidity Pool (LP) Ownership Percentage

Still related to the second point, LP ownership is pretty straight forward. It is the percentage of ownership on certain liquidity pool, the more people add to the pool, the more diluted the pool will be.

For example : X provided 1000 USD worth of liquidity in ENE/AVAX pool, anytime a user swap, they will have to pay 0.3% of swapping fee to X. But one day Y add another 1000 USD on the same ENE/AVAX pool. So now the ownership of ENE/AVAX pool is slashed in half, so whenever any user swap on the pool X get 0.15% and Y get 0.15%

4. Liquidity Pool (LP)Depth

LP Depth is the measure of how much value contained within the Liquidity Pool. The deeper the LP goes, the more it can accomodate user that swap larger amount of token, and the lower the slippage becomes for the swappers.

5. Impermanent Loss

Impermanent loss describes the temporary loss of funds occasionally experienced by liquidity providers because of volatility in a trading pair. This also illustrates how much more money someone would have had if they simply held onto their assets instead of providing liquidity.

Those are the important lingos that are related to DEX and Liquidity that users need to know. Do we missed something? Do you have any request which lingo that we must cover next? Let us know on ENEDEX community channels.

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