Becoming a Liquidity Provider
Earn fees and points by providing liquidity to hx.finance pools. This guide covers everything from basics to advanced strategies.
What is Liquidity Providing?
As a liquidity provider (LP), you:
- Deposit token pairs into pools
- Enable others to trade
- Earn fees from every swap
- Earn points continuously
- Can withdraw anytime
Why Provide Liquidity?
Earn Trading Fees
- Dynamic fees from every swap
- Proportional to your share
- Compounds automatically
Earn Points
- 0.24 points per dollar per day
- Tier multipliers apply
- Passive accumulation
Support the Ecosystem
- Enable trading
- Reduce slippage
- Strengthen hx.finance
Understanding Concentrated Liquidity
HX Finance uses an advanced concentrated liquidity system:
Traditional AMM (V2 Style)
- Liquidity spread across all prices (0 to ∞)
- Most capital sits unused
- Lower fee earnings
- Simple but inefficient
Concentrated Liquidity (HX Finance)
- Precise Range Selection: Choose exact price ranges where your liquidity is active
- Dynamic Fees: Fees adjust automatically based on market volatility
- Up to 4000x Capital Efficiency: Concentrate capital where trading happens
- Modular Architecture: Flexible plugin system for advanced features
- Active Management: Reposition as markets move
How It Works
- Instead of providing liquidity across all prices, you "zoom in" on specific ranges
- Example: For WHYPE/USDE at $50, you might provide liquidity only between $40-$60
- Your capital earns fees only when the price is within your range
- Outside your range, your position becomes inactive but can be repositioned
Step-by-Step Guide
Step 1: Choose Your Pool
Navigate to the Pools page (opens in a new tab)
Popular Pools:
- WHYPE/USDE (High volume)
- WHYPE/USD₮0 (High volume)
- WHYPE/USDXL (High volume)
- UETH/USDE (Stable earnings)
- UBTC/USDE (Growing volume)
- BUDDY/USDE (Community favorite)
Consider:
- 24h Volume (Higher = More fees)
- TVL (Total Value Locked)
- Current APY
- Your token holdings
Step 2: Click "Add Liquidity"
Find your chosen pool and click "Add Liquidity"
Step 3: Select Your Price Range
This is the most important decision in concentrated liquidity!
Full Range (Beginner-Friendly)
- Covers all possible prices (0 to ∞)
- Set and forget approach
- Lower capital efficiency
- Always earning fees (but diluted)
- Similar to V2 AMMs
Concentrated Range (Recommended)
- Focus liquidity around current price
- Much higher fee earnings per dollar
- Example ranges:
- Conservative: ±30% from current price
- Moderate: ±20% from current price
- Aggressive: ±10% from current price
Narrow Range (Advanced)
- Maximum capital efficiency
- Highest fee potential
- Requires active monitoring
- Risk of quickly going out of range
- Best for experienced LPs
Dynamic Fee Advantage Fees automatically adjust based on:
- Market volatility
- Trading volume
- Price movements This means you earn optimal fees without manual intervention!
Step 4: Understand Dynamic Fees
Unlike fixed fee tiers, HX Finance uses dynamic fees that automatically adjust:
Base Fee Levels
- 0.05%: Common for most pairs
- Automatically increases during high volatility
- Decreases during stable periods
How Dynamic Fees Benefit You
- Higher fees during volatile markets = more earnings
- Lower fees during calm periods = more volume
- No need to manually switch fee tiers
- Optimal fee capture without intervention
Step 5: Enter Amounts
Balanced Deposit
- Enter amount for one token
- Other amount auto-calculates
- Must maintain pool ratio
Custom Amounts
- Possible within your range
- May create unbalanced position
Step 6: Review & Add
Check before confirming:
- Price range set correctly
- Token amounts accurate
- Estimated fees/APY
- Points earning rate
Step 7: Approve & Confirm
- Approve token spending (first time only)
- Confirm the transaction
- Receive your LP NFT
Real Example: Adding to WHYPE/USDE
Let's add $1,000 of liquidity:
Pool Selection
- Pool: WHYPE/USDE
- Current Price: 1 WHYPE = 50 USDE
- 24h Volume: $500,000
- TVL: $2,000,000
Range Selection
- Current Price: 50 USDE
- Lower Bound: 40 USDE (-20%)
- Upper Bound: 60 USDE (+20%)
- Conservative but effective
Deposit Amounts
- 10 WHYPE ($500)
- 500 USDE ($500)
- Total: $1,000
Expected Returns
- Daily Fees: ~$6.25 (0.625%)
- Daily Points: 240 (before multipliers)
- Monthly: ~$187.50 + 7,200 points
Managing Your Position
Monitoring
- Check position daily
- Watch price movements
- Track fee earnings
- Monitor point accumulation
When to Adjust
- Price nearing range boundaries
- Significant volume changes
- Better opportunities arise
- Rebalancing needed
Collecting Fees
- Fees accumulate in position
- Collect anytime
- No automatic distribution
- Gas efficient to batch
Advanced Strategies
1. Range Orders
Use tight ranges as limit orders:
- Set range above/below current price
- Acts like a limit order
- Earns fees while waiting
2. Volatility Harvesting
For volatile pairs:
- Wide ranges during calm periods
- Tight ranges during trends
- Adjust based on momentum
3. Multiple Positions
Diversify across ranges:
- Core position (wide range)
- Satellite positions (tight ranges)
- Different fee tiers
4. Rebalancing Strategy
- Take profits from out-of-range positions
- Redeploy at current prices
- Compound earnings
Understanding Impermanent Loss
What It Is
- Temporary loss vs holding
- Occurs when prices change
- Realized only on withdrawal
How to Minimize
- Choose correlated pairs
- Use appropriate ranges
- Earn enough fees to offset
- Consider stable pairs
Example Calculation
Initial: 10 WHYPE + 500 USDE ($1,000)
Price doubles: WHYPE = 100 USDE
Position value: ~$1,414
If held: $1,500
IL: ~5.7% ($86)
Fee earnings of $200 would result in net profit.Points & Rewards
Base Rate
- 0.24 points per dollar per day
- Example: $1,000 position = 240 points/day
With Multipliers
- Tier 2 (1.1x): 264 points/day
- Tier 3 (1.2x): 288 points/day
- Tier 4 (1.3x): 312 points/day
- Tier 5 (1.5x): 360 points/day
Optimization Tips
- Maintain positions for full days
- Larger positions earn more
- Active in high-volume pools
- Compound earnings
Common Mistakes to Avoid
Too Narrow Ranges
- Frequently out of range
- Missing fee opportunities
- High management overhead
Ignoring Gas Costs
- Frequent adjustments reduce profits
- Batch operations when possible
Wrong Pool Selection
- Low volume results in low fees
- Check historical data
- Avoid inactive pools
Emotional Decisions
- Hasty adjustments
- Impulsive pool selection
- Deviating from strategy
FAQs
Q: How much should I start with? A: $100 minimum, $1,000+ recommended for meaningful returns
Q: Can I lose money? A: Yes, through impermanent loss, though fees often compensate
Q: How often should I collect fees? A: When fees exceed gas costs, typically weekly or monthly
Q: Best pool for beginners? A: WHYPE/USDE with ±30% range