Providing Liquidity
Upon fractionalizing an NFT, you have the opportunity to create a market to sell fractions of your NFT. The protocol supports the creation of a Raydium AMM. As a fraction holder you can provide liquidity to the AMM and earn fees.

Liquidity Pools

"Providing liquidity" refers to the act of adding liquidity for both sides of a trading pair to a pool to enable others to trade between the pair. When you add to a pool you receive Liquidity Provider tokens (LP tokens). For example, if a user desposits $DAOJONES and $SOL into a pool, he receives DAOJONES-SOL LP tokens.
These tokens represent a proportional share of the pooled assets, allowing a user to reclaim their funds at any point.
Every time a user swaps between $DAOJONES and $SOL, a 0.25% fee is taken on the trade. 0.22% of that trade goes back to the LP pool (rewarding the liquidity providers) and 0.03% of that goes to support Raydium's infrastructure.
  • If there were 100 LP tokens representing 100 DAOJONES and 100 SOL, each token would be worth 1 DAOJONES & 1 SOL.
  • If one user trades 10 DAOJONES for 10 SOL, and another traded 10 DAOJONES for 10 SOL, then there would now be 100.022 DAOJONES and 100.022 SOL.
  • This means each LP token would be worth 1.00022 DAOJONES and 1.00022 SOL now when it is now withdrawn.
If you are unfamiliar with the concept of impermanent loss, reviewing this article for a basic understanding is highly recommended.
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