KLEX Liquidity Provision

Overview

There are a few different types of fees on Klex, each collected to support a healthy ecosystem. For example, Liquidity Providers collect swap fees as users trade with pools; this acts as an incentive for them to continue providing liquidity, which is useful to facilitate trades.

Swap Fees

Traders pay swap fees when they trade with a pool. The fees ultimately go to Liquidity Providers in exchange for them putting their tokens in the pool to facilitate trades. Trade fees are collected at the time of a swap, and it goes directly into the pool, growing the pool's balance. For a trade with a given inputTokeninputToken and outputTokenoutputToken, the amount collected by the pool as a fee is Amountfee=AmountinputTokenswapFeeAmount_{fee} = Amount_{inputToken} * swapFee. As the pool collects fees, Pool Tokens automatically collect fees because they represent a proportional share of the pool.

Example

Let's say Alice, Bob, Chuck, and Diana all provide liquidity in the same pool starting out with a total value of $100. After some time, the pool has collected many trade fees and is now worth $200. The pool itself grows while the Liquidity Providers' proportional shares stay the same.

Person

Proportional Share

Initial Value

Value After Trading

Alice

50.0%

$50

$100

Bob

25.0%

$25

$50

Chuck

12.5%

$12.50

$25

Diana

12.5%

$12.50

$25

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