FAQ — Liquidity Mining

This article contains the following sections:

 

1. What is Zoomex Liquidity Mining?
2. Which liquidity pairs does Liquidity Mining support?
3. What tokens does Zoomex support for Liquidity Mining?
4. How is yield generated for Liquidity Mining products?
5. Are there any fees associated with Liquidity Mining?
6. Is there any risk associated with my principal?
7. What is impermanent loss?

 

1. What is Zoomex Liquidity Mining?

Liquidity Mining refers to liquidity pools that are based on the automated market maker (AMM) model. You can add liquidity to a pool to become a liquidity provider and earn yield from trading fees, as the assets you add to the pool also provide liquidity to the derivatives market.

Zoomex's AMM automatically calculates buy and sell prices based on the constant product market maker model (x * y = k), providing continuous quoting to the market.

2. Which liquidity pairs does Liquidity Mining support?

You can view the supported liquidity pairs here.
(This link can be accessed after logging in.)

3. What tokens does Zoomex support for Liquidity Mining?

Any tokens listed in liquidity mining as part of the trading pair is supported.

4. How is yield generated for Liquidity Mining products?

Yield is generated by supplying liquidity to the Derivatives market within Zoomex, managed by trusted third parties. No on-chain activity is involved in the yield generation process.

5. Are there any fees associated with Liquidity Mining?

Zoomex won't charge any fees when you add or remove liquidity. If the liquidity you’ve added exceeds a certain threshold, however, you may experience slippage.

6. Is there any risk associated with my principal?

Liquidity providers may experience impermanent loss, a frequent and often unavoidable occurrence in liquidity mining. However, platforms typically compensate liquidity providers with revenue shares that outweigh impermanent losses significantly.

7. What is impermanent loss?

Liquidity providers deposit assets into liquidity pools with two different tokens. Sharp price fluctuations can skew the token ratio within the pool, causing one token's quantity to increase significantly while the other token's quantity decreases abruptly. Since liquidity provision and redemption follow a 1:1 equivalent ratio, liquidity providers may experience discrepancies between the tokens deposited and withdrawn. This change in token quantity and asset net value due to market price changes is known as impermanent loss, representing the opportunity cost incurred in participating in liquidity mining.